I have often wondered why the predominant examples that you would find online of how to leverage the genius of compound interest are always related to the stock market. Sure it is a great example, and many have built wealth through stocks but are there any other ways that compound interest can work for you? Sure there are.
Plant a tree: I know, I know, you must think “ this has to be a joke right? But it isn’t. Planting a tree is one of the most fundamental and simplistic examples of how a small investment can compound. On Jan 1, 2022, you buy an apple tree from Costco for $35 because it so happens that honey crisp apple is your favourite fruit. You get home and plant the tree in your backyard and wait for it to fruit. The tree tag indicates that the tree would begin to fruit 2 years after you plant it, so you wait
Year 1, the tree produces lots of leaves and more branches
Year 2, the tree produces 5 midsize apples
Year 3, you harvest 1 bucket of apples
Year 4, you harvest 3 buckets of apples
By year 5, and producing at its full capacity. You harvest more than 10 buckets and have lots left of the tree. So you decide to give some to your neighbours, and sell some at the farmer’s market. You advertise your apples as local and organic apples – buyers are excited and willing to pay$8 for a bag of apples.
By year 6, not only do you have all the honey crisp apples you could ever eat, you are not making $8 a bag, and are able to harvest and sell more than 50 bags each season – $400/season, excluding apples you give to family and friends.
Not bad for a $35 investment don’t you think?