8th wonder of the world

I was having a chit-chat with my son in the car during Xmas.

"Son, do you know what is the 8th wonder of the world?"

"No, is there one?"

"Considering that you are going to study for a degree, if there is only one thing I can teach you, this is it. Go Google - Einstein and the 8th wonder... And why you think I make you save your ang pow money in the CPF account every Chinese New Year?"

"errr... to stop me from spending my Ang Pow money lor" 

Toot. 🙄 ... so this conversation didn't really sink into his head, until he received his CPF statement recently. 

"Hmmm.... didn't know I have $15k in my CPF account already. wow interest of $736 is not too bad!" (Back of envelope yield works out to be around 4.6%)

"Well, that is the 8th wonder I was telling you about, why not you flip the page and read the financial tip in the CPF statement"

Again, the picture didn't really sink in. Don't really blame him. I didn't understand it till much later in life. 

"Let's put it this way. The additional interest you can get by saving $1,000 in an account that pays 2% more today will compound to $2,961 at age 65. In other words, if you deposit $100,000 in the special account, you will get $296,100 more in interest than in the ordinary account."

"Wow ... that is a lot of money 💰!"

"Yep...This is the magic of compounding and we human beings are pretty bad in geometric calculation mentally."

Somehow, when you scale up the numbers, it capture their attention better. (Same for the rest of us?)

Today, I would encourage you to make use of this 8th wonder for your retirement planning. 

1. Invest for the long term 
2. Reinvest the dividends / interest 
3. Keep adding on new to your investments every year 

The key point of today's post is to highlight that through the "magic of compounding", there is a lot of "free" money to collect. If you are not investing, you can't benefit from compounding. 

I have witnessed it myself when I change my perspective to invest for the long term - it gives you a piece of mind versus short term trading (speculation). 

Happy compounding your way to financial freedom! 🏖