I'll lead off with the end of the story...take the penny! But why?
Your Sherpa teams up with parents to help produce future-ready young adults. First, we create a sense of urgency over the NEED to save. Second, we motivate young people to WANT to save by demonstrating how money can grow. Third, we ensure people stay in the POSITION to save by avoiding obstacles to saving like crippling college debt or being underemployed. And fourth, we teach HOW to save with an emphasis on the right mindset and method to succeed.
Today's post supports the 'money can grow' component of our framework.
...so why is "take the penny" the correct answer? When I offer you a penny vs. $1,000,000, I also give a condition. The penny can double in value every day for a month. So, the real question is - would you choose $1,000,000 now or a penny if it can double in value 31 times?
Let's check in on how that penny does doubling each day:
- We have 2 cents after 2 days. Simple enough.
- After a week we have only 64 cents.
- After 10 days, about a full third of the month, we still have just over $5 vs. a million.
- Doubling daily though gains some serious steam. We clear $10,000 after 3 weeks.
- Week 4 (day 28) is key as $671k doubles to $1.3m!
- The rest is gravy. A few more doubles and by the end of day 31...almost $11m!
Simple math (double every day). Powerful message (money can grow exponentially). Not very realistic though (a 100% return in one day, repeated 31 times) far exceeds even the greatest stock market mania and frankly will NEVER happen.
Future posts will explain more realistic return expectations (e.g., that it is reasonable to assume money can double every 10 years) and how even that can be truly life changing, especially if you start early and give money time to work for you.