You Can Save $109k by Using Fewer Baby Diapers
The Power of Compound Interest and How Saving Just a Little Over a Lifetime Can Add Up
So my daughter is young, a little over 2. As anyone with children this age knows, it's time to work on potty training. As I'm sitting there drying her hair, I decide to throw in some compliments about a good day's work at using the potty. Hey, she's two and loves these sorts of compliments, plus it makes her want to try harder tomorrow.
Joking with my wife, I said if we get her potty trained 6 months earlier than planned, that would save around $240 in diapers this year. Not a small sum of money! My wife started to tell her we could buy her more toys, but I interrupted and told her we would save it for her retirement!
My daughter giggled and had no idea what I meant, but she tried to repeat it back to me anyhow. "Yea, retirement! High-5!" I said. She obliged with a big smile.
Anyhow, I went back to my computer and decided to find out what her diapers savings would be worth in retirement. I punched the $240 in savings with no annual additions, compounded quarterly for 62 years (she is a long way away from retirement) at a measly 5% and came out with: $5226.12
I know I can do better than that for her, so doing it again at 8%: $32,587.71
Now let's say we go real aggressive because she is so far away from retirement and we get 10% (average S&P 500 return over the last 20 years): $109,579.64.
So, 6 month's worth of diapers is worth $109k in retirement.
I think I know what we are going to work on tomorrow.