9 Financial Concepts Every Functioning Adult Should Know
As a functioning adult with sarcastic tendencies, I just had to click on the link. It did not disappoint! I could go on and on about how useful this article was to me, but let's just dwell on one thing in particular.
Here's an example: If you start off with $100 earning 7% interest annually, after your first year you'll have $107. The next year, you'll be earning 7% interest on $107 and not $100 (you'll earn $7.49 instead of $7).
Start off with $100 earning 7% interest annually? That's the example? What is this? 1990? What a great year! Can't you just picture the wealth rapidly snowballing? It's a cold slope. There's plenty of snow! The snowball just gets bigger and bigger as it rolls downhill! The wealth rapidly snowballs! Woohoo!
It doesn't sound so impressive when we're discussing $7 at a time, but compound interest is the concept that powers the exponential growth of retirement savings. As Business Insider's Sam Ro puts it, "It's the deceivingly simple force that causes wealth to rapidly snowball."
Yes! That's what I'm talking about!! Exponential growth and wealth that's rapidly snowballing! Bravo!
Now let's start off with $100 earning 0.2% interest annually. The year is 2010. What a great year! It's a hot slope though. Hey, look! A camel! Thanks to inflation, the snowball just gets smaller and smaller as it rolls downhill! The wealth rapidly snowballs into nothing! Exponential decay! It's deceivingly simple really. I'm kind of surprised so few functioning adults actually need to be told. Then again, it never hurts to point out the risks. Exponential decay is associated with harmful radiation. Keep it away from snowballs and human retinas!
Of course, there are other things to keep away from human retinas. I'm not going to try to stop you from reading about the 9 financial concepts every functioning adult should know though. I think the thing that intrigued me most was that there wasn't a tenth thing. That's really thinking outside the box.