Have you ever heard someone tell you the cost of a candy bar when they were a kid? It’s almost as if they were stuck in the past and forgot about all the years in between.
The Hershey Bar
Taking a look back, the famous Hershey Candy Bar hovered at 5 cents per bar in the 1920’s and held at those prices until the 1960’s. That’s pretty similar to a postage stamp, which was at 5 cents in the early 60’s.
However, things did change, and inflation kicked in, and prices rose. The price of a stamp jumped to 32 cents in 1995 which is more than a five times increase.
So what does all this data have to do which the real cost of a candy bar? It’s the opportunity cost of the candy bar and other goods that you could buy today. What I’m talking about is the cost you pay today could be worth more or less elsewhere. If you saved those five cents in 1920, you might have a considerable amount more if you had invested it. It might not seem like a lot but let’s run a few numbers.
If you saved your five cents and invested it at a rate of 5%, over a 30-year period; you would have just about 22 cents. If you increase these numbers to something a little more substantial; let’s say $100 over a 30-year period at 5%; you would have about $446. If you saved $100 per month for 30 years at the same 5%, you would have $83,672. That’s a $36,100 investment plus a $47,572 gain over that 30 year period.
You earned more than you invested!
Understanding your opportunity cost in your financial plan may help and motive you to save more.
It’s not just a candy bar anymore – it’s your retirement and your goals. It’s true when they say, “a penny saved, is a penny earned!”
You don’t have to win the lottery or bank on your rich Uncle. Just good old fashioned hard work and dedication are all you need.