Imagine a hypothetical TV game show that you were lucky enough to participate and win. At the final round, the show host gives you a choice. 

You can choose to collect a cheque for Rs. 1 Crore and walk away. 

OR

You can choose to receive just 10 paise in your bank account that day. But the catch is, in this hypothetical account, your money will double every day for 31 days. 

What would you choose?

(Just think of the answer that comes to the top of your mind!)

Many people may choose Rs. 1 Crore in hand because it sounds big and cannot imagine or calculate - without a calculator or spreadsheet - how big 10 paise doubling for 31 days can become. 

The answer may surprise you. With 10 paise doubling for 31 days, you’ll end up with Rs. 10 Crores! That’s 10 times what you can get with the other choice!

Not only that, as you can see from the table above, at the end of 28 days, your account balance would be more than Rs. 1 Crore. But in the next 3 days it grows to Rs. 10 Crores!

This hypothetical example is only to illustrate - with high contrast - the power of compounding of money, a concept that requires non-linear thinking and is not easily understood by most of us. 

In a more relatable scenario, assume 31 years instead of days. This is practically most of your working life. You start off with Rs. 10 Lakhs. This grows by 12% every year on average. You will still end up with Rs. 3 Crores at the end of 31 years. 

The point here is to understand the value of time in compounding investments. 

To make the calculations more realistic for your specific financial goals, you should start with your time horizon, calculate the value you need adjusted for inflation, and take appropriate risks with investments to gain returns that can beat inflation. Most importantly, you will make consistent investments rather than just one time. Together, you’ll end up with the corpus you require at the time of your need with proper multi-year planning and discipline. 

None of this is complicated mathematically - but our minds do not think long-term or non-linearly by default. But learning to think this way could put you ahead of 95% of the population!