Real world: The Case of the Early Bird

(rain pattering) - [Duction] The name's Duction, Detective Dee Duction. I'm a private eye, and my eye is pointed straight at monetary mysteries. Love them. Financial tomfoolery, dollar double-dealing, that's my wheelhouse and no mistake. There's one case I keep coming back to, turning it over and over in my mind, like a tarnished, tawdry old coin. I call it The Case of the Early Bird. There were two friends, see, Miguel and Jasmine. Both worked for the same firm. Both made the exact same income. Both hired, in fact, on the very same day. - [Miguel] Wow, what an honor it is to work at Widgetcorp. - [Jasmine] Yes. I love making widgets. They're such great abstract units of production. - [Duction] When they filled out their onboarding paperwork, they had to answer a series of questions, like if they wanted to contribute to a 401k savings account. - [Miguel] Health insurance, yes. Dental insurance, yes. Retirement, um, yes? I heard it's good to save. Why not? $25. - [Jasmine] Eh, I'll start contributing later. I'm too young to start thinking about retirement. This is my first real job. Let me get used to the salary first, you know? - [Duction] So Miguel contributed $25 per paycheck and Jasmine contributed zero. Years pass, Widgetcorp continued to make widgets, Miguel and Jasmine continued to be friends, and Miguel continued to contribute $25, automatically deducted from every paycheck to his 401k, and he never thought about it again. - [Manager] What stellar employees, and can you believe we got them both on the very same day? Here's to another 10 years of Jasmine and Miguel. Congratulations, you two. Thank you for all the work you've done for Widgetcorp. (employees applauding) - [Employee 1] Yeah! (employees cheering and applauding) - [Employee 2] Awesome. - [Employee 3] Yay. (employees cheering and applauding) - [Employee 4] I love widgets. - [Employee 5] Widgets! - [Jasmine] We've loved working here. Thank you. - [Miguel] Thanks, y'all. Keep treating us this well, and we'll never retire. - [Jasmine] You'll get sick of us. (employees laughing) Speaking of retiring. - [Miguel] Yeah? - [Jasmine] Should I contribute to my 401k? - [Miguel] I would. I think I'm still contributing to mine. On Monday, you should talk to Bryce in HR. He'll get you set up. - [Jasmine] Perfect. - [Miguel] But okay. More importantly, how was your kid's first day at school? - [Jasmine] Oh man, she cried so much. - [Miguel] Oh, no. - [Jasmine] But when she came home, she was so excited to go again. - [Duction] After 10 years, Jasmine decided to start contributing to her 401k. To catch up to Miguel, she doubles her contribution. $50 per paycheck. Miguel keeps his contribution the same $25 per paycheck. Keep those numbers in mind. Years pass. Another 30 years, in fact. Fortunes rose and fell, hearts broke and were mended, children grew and married and had children of their own. Miguel and Jasmine grew old and comfortable, and both of them decided to retire. - [Miguel] 40 years at Widgetcorp, Jas. That's a long time to do one thing. - [Jasmine] We made some good widgets, Miguelón. - [Miguel] We made some great widgets, but I'm ready for something new. - [Duction] And here's where the mystery comes in, ladies, germs, and pachyderms. Here's where the big old walloping whopper of a mystery strides into view. Who do you think has more money at retirement? Is it Miguel who saved $25 per paycheck for 40 years? Or Jasmine, who saved $50 per paycheck for 30 years? Place your bets, folks. Who do you think ended up with more money? Pause your video here if you want to think about it a little. If you guessed Jasmine, you were wrong. When they looked at their retirement accounts, Miguel had around $168,000 and Jasmine had $147,000. - [Miguel] Hot dog! - [Duction] So there you have it. The Mystery of the Missing Moolah. Where did all that extra money come from, and why did Miguel have so much more of it to than Jasmine did? I tore up the city looking for leads until I realized, the culprit had been in front of me this whole time. It was my old friend, Compound Interest. Wasn't it, Compound? - [Compound Interest] Aw jeez, Dee. You can just call me CI, all right? Cool it with the fire brigade,; I'm on the level! - [Duction] What did you do to Jasmine's money, you low-down scheming alley rat? - [Compound Interest] I grew it same as anyone, jeez! If you'd put me down for 10 seconds, I'll explain it to you. - [Duction] I'm all ears, CI. - [Compound Interest] So you know how I operate, right? - [Duction] Yeah, yeah, I saw it on Khan Academy. I'm no Janie-Come-Lately. The longer you operate, the bigger the pile of dough. - [Compound Interest] Exactly. Even though Jasmine saved for 30 years and at double the rate of Miguel, Miguel's extra 10 years of savings meant that he had more time for the interest to compound, even though he invested a smaller amount of money. - [Duction] You're saying that even with his smaller contributions, he still outpaced Jasmine? - [Compound Interest] Slow and steady wins the race, Dee. The earlier you start saving for retirement, the better off you'll be. Even if it's just a couple of bucks, they start adding up. - [Duction] So that was it. The secret to Miguel's success was that he started early and he didn't even think about it. He set up an auto deduct from every paycheck that paved the road to his success, and thanks to that weird little turnip, Compound Interest. - [Compound Interest] Hey, I'm standing right here. - [Duction] He managed to increase his little nest egg big time. It tells you something. It's a little voice at first, but it gets louder and louder. It says, "Don't wait. The best time to start saving is today. It's never too early to save for your retirement." I'm just a private eye. I don't know what the rate of return is gonna be, but I'll tell you this. The longer you save, the more money you'll get back when you retire. Saving for a rainy day is never a bad idea, because at a town like this, precipitation is expected. (thunder rumbling)