Mysterious Compounding

Tonight I demonstrated to Ellen the power of compounding.  She has a small Roth  from her earned income when Susan was operating The Laurel House.  Using Ellen's calculator we calculated the amount of money she could have based on 5% and 10%  growth rate from age 12 to age 57 (45 years).  It always astonishes me - everytime I do it   -- even without a visual!  Blog 10/27/2009 -  Moore's Law Ending.

One Dollar 45 years later at 5% growth  = $8.99   and for a 10% growth  = $72.89. 

For double the growth rate - OVER 8 times the money!!!

Take this test.  Suppose the growth rate is 20% (double the 10%).   How much would Ellen's $1 be worth at age 57?
(a)  Another 8 times -       $583
(b)  Another 16 times -  $1,166
(c)  Another 32 times -  $2,332
(d) Another 50 times -   $3,657

Answer:  D -  Compounding is Confounding :)