That’s why compound interest is more valuable than ever
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The rich have always been the ones who carve out the lion’s share of compound interest, which is why they often increase their wealth exponentially. But there is no reason for it to stay that way.
With new scientific breakthroughs that mean we’ll live much longer, everyone now has the chance to get rich – albeit slowly – using compound interest.
First, let’s quickly remember compound interest and see why Einstein called it the eighth wonder of the world.
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Compound interest is the eighth wonder of the world
To get rich with compound interest, all you need to do is invest your money in stocks or assets that have high returns year after year.
The basic calculation of compound interest is this: If an 18-year-old starts investing just $ 100 per month and sees that 10% average annual return, at age 65 that person will be a millionaire.
After depositing a total of $ 56,400 during this period, he or she will end up sitting on a nest egg of over $ 1.3 million. If the hypothetical 18-year-old invested $ 200 each month during the same period, he would have about $ 2.7 million. Add extra time to that – let’s say five more years – and that figure climbs to almost $ 4.5 million.
This is the power of compound interest.
With new asset classes like cryptocurrencies, it’s possible to dramatically eclipse that 10% annual return, meaning you could hit those numbers much faster. But even small bumps can make a big difference. Continuing with the last example, if the 18 year old had achieved a 15% return, he or she would be sitting on almost $ 40 million!
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The exact thing that makes compound interest work is also the reason many of us never implemented it in the first place: time. If you’re in your late twenties or thirties or older, waiting 45 years to get rich doesn’t sound so appealing.
Longer life expectancies make compound interest even more important
But I have good news. Things change; scientists are making breakthroughs in longevity and aging faster than ever.
Originally published in 2007, Aubrey de Grey’s book End Aging was perhaps the first to present a unified hypothesis of the seven different forms of damage that builds up in our bodies year after year. At the time, the concept of “aging as a disease” was considered borderline quackery.
Today, it’s not only an area rife with innovation, but it’s also common, with de Gray and other leading scientists like David Sinclair, author of the bestselling bestseller. Lifetime and professor of genetics at Harvard Medical School, disseminating their ideas on major platforms.
A notable concept popularized by de Gray is the “escape speed of longevity”. The basic idea is that we will soon reach a point where science saves us more time than the time that has just passed. In any given year when the escape rate of longevity is maintained, technological advancements would increase life expectancy more than the past year.
Earlier this year, de Gray tweeted that he thinks there is a 50% chance that we will hit the escape speed of longevity by 2036, after which those who regularly receive the latest rejuvenation strategies can look forward to a very long life. The pace at which we are making breakthroughs in this arena means it’s time to reexamine the rather boring, slow, and steady way of building wealth that is the magic of compound interest.
The moral of the story?
Start planning to get rich slowly now.
The weather will soon be on your side.
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