Category Archives: Compounding

The Time value of money and tiffany and american express – or just save $1.50 per day.

An in-law  just received two crystal Tiffany glasses from American Express worth about $100 for being a platinum “member” for 50 years. If one assumes that the cost is $550/year as it is now, so excluding any future increases one can calculate the time value of the money. For some, the travel benefits may be worth the annual fee, but for many, perhaps not.  This isn’t to pick on American Express, for many people, their cards are worth the cost, but it illustrates the value of even saving $1-$2 per day over time.

For example, you may get $200 in Uber credits, an annual airline fee credit of $200, lounge access, elite status with Hilton and Marriott. These are benefits that are worthwhile for big travelers, but the in-law hadn’t travelled significantly in at least 25-28 years. He was in his 90s and he passed away several months prior in his to the 50 year gift, but his wife is still a member.

Don’t have an Amex Platinum? Just save $1.50 per day or $45/month (or $550/year) and invest it in stocks – S&P 500, small-cap value, growth blend. If you start at 20, by the time you are 70, you’ll be well positioned.

At $550/year for 50 years at 11% (invested in stocks) it grows to around $1.3 million.  At 10% it grows it about $850k. At 12% it grows to about $2 million.

So, would his widow prefer two crystal glasses worth around $100 or $1.3 million in stocks?