The Mustard Seed
I have given many financial seminars where I start out with the story of two employees.. Each employee is giving the option of receiving $1,000 per day in wages for 28 days or starting with a penny and having their wage double each day.
Most people assume the $1,000 per day will be a much higher number, but lets review the numbers
- After week one, employee # 1 have $7,000 in wages, employee # 2 will have a $1.27
- At the end of week 2, employee # 1 is up to $14,000 in total wages, employee # 2 has $163.83
- After three weeks, the two employees are almost equal. # 1 has $21,000, # 2 has $20,971.51
- At the end, employee # 1 has earned $28,000. Not bad wages for a less than a month. However, # 2 has earned a total of $2,684,354.55.
Like the mustard seed that starts as a very small seed and grows into a large plant at maturity, the power of interest compounding starts small and over time becomes very powerful.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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