“Exponential growth bias”, ou porque, mais uma vez, TEMPO GANHA DE TAXA.
comentada em 15/08/2020 11:23

If You Donâ??t Save Enough, Perhaps You Have â??Exponential Growth Biasâ??


"Although the math is just basic arithmetic, many of us assume the final number will be far smaller, a blind spot known as exponential-growth bias. Simply put, exponential-growth bias is the tendency to neglect the effects of compound interest, which is what happens when earned interest is reinvested. Research shows that this bias matters: Households with a stronger bias tend to save less and borrow more. They have portfolios that include more short-term assets and an overall lower net worth.

In recent years, behavioral economists have come up with tests to measure an individual’s level of exponential-growth bias. Here’s a typical question:

Assume that you deposit $400 every month into a retirement savings account that earns a 10% yearly rate of interest. How much money do you think you will have in your account after 40 years (including interest earned)?

Ready for the answer? It’s about $2.5 million after 40 years. If you didn’t get it right, don’t worry; most people don’t. In fact, a clear majority make the exact same error. They multiply 400 x 12 x 40 x 1.1, which is equal to $211,200. Not a paltry amount, but it’s less than 10% of the actual total

(The correct calculation requires adding the earned interest for each year to the principal sum, and then calculating the interest for the next year based on that amount. While online calculators can make the process far easier, they do require that people first realize they need help.)

How did you do? If you were far off in your estimate, you may have exponential-growth bias and should be mindful of making two common mistakes when it comes to saving for retirement."