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| McEwen Lecture Hall, the largest classroom on Fredonia's campus |
He wanted to teach us how to save money for retirement. He knew that most of us didn't have a clue how, or why it was important in the first place.
He gave us a simple example: If you invest $1,000 in a stock -- say, General Motors (GM) -- and that stock gains 10% in value in a year, you've made $100. Now you have $1,100.
But, if you also invested another $1,000 during that year, you have $2,100. Invest that again with the same 10% return, and you'll make another $210. Now you're at $2,310.
This is called compounding interest, and I was interested immediately.
But there was a catch, he said. Most people had trouble investing money because there aren't many rewards at first. It's much more rewarding to buy a pair of shoes right now than it is to invest money you can't touch for decades.
Most of the rewards for investing come when you've reached retirement age. Say you've saved $700,000 by the time you're 65. Invested one more year getting a 10% return, you'll make $70,000! But that wouldn't be possible had you quit investing when you were 40.
Learning happens the same way. Whether we're learning math, music, or a foreign language, the results of our learning are small at first -- almost not worth the effort. But the results get exponentially larger the further we go, meaning the people who finish a course of learning end up vastly more skilled than those who quit halfway.
Or consider volleyball. In 2015 there were 42 All-Americans named in Division III women's volleyball. Of those, 39 were either juniors or seniors, three were sophomores. and none were freshmen. It seems there's a big payoff for sticking it out.
Most things worth doing follow this sort of pattern, where the rewards come at the end.
[PS - I'm far from a financial adviser, but my favorite authors on the topic are Ramit Sethi and Suze Orman]