I would offer two thoughts. One simple and a bit silly but I realized early in my working life that 'if you spend all your money before you earn it or when you earn it you will never have any money." It is amazing how often that telling someone that simple fact makes them stop and think and realize how true it is. Second, learning the simple formula of 1 plus the interest rate to the power of the number of years give you the value of a dollar at that inflation or interest rate. FOr example let's just use 4% and it could be interest or inflation and lets look at it for 30 years we get 1.04 to the 30th power and the answer is 3.24. THat means 30 years of 4% inflation means it will take $3.24 30 years hence to buy a today's dollar's worth of goods or if invested you will have $3.24 after 30 years for each dollar invested. It is very useful to play with this calculation to get a working understanding of time value of money It is valuable when thinking about savings and you can easily see the importance of starting early. It also can help you gain some realism about how much money you need to retire.
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I would offer two thoughts. One simple and a bit silly but I realized early in my working life that 'if you spend all your money before you earn it or when you earn it you will never have any money." It is amazing how often that telling someone that simple fact makes them stop and think and realize how true it is. Second, learning the simple formula of 1 plus the interest rate to the power of the number of years give you the value of a dollar at that inflation or interest rate. FOr example let's just use 4% and it could be interest or inflation and lets look at it for 30 years we get 1.04 to the 30th power and the answer is 3.24. THat means 30 years of 4% inflation means it will take $3.24 30 years hence to buy a today's dollar's worth of goods or if invested you will have $3.24 after 30 years for each dollar invested. It is very useful to play with this calculation to get a working understanding of time value of money It is valuable when thinking about savings and you can easily see the importance of starting early. It also can help you gain some realism about how much money you need to retire.
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Link to comment from March 18, 2023