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10/22/2019 Time Value of Decisions

This email is a little longer than usual, but I think you'll enjoy it. :)


by Kathi Dunlap

Perhaps you’ve heard of the time value of money. This is a concept that financial advisers and parents(!) try to impress upon young adults, making them aware that money invested early is worth more than money invested later in life. says: “The time value of money draws from the idea that rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time.”[1]


Get the money now, invest it well, watch it grow. Simple idea, right? The problem is actually setting money aside while you are young and not using it for more immediate desires. It is common for young people to ‘understand’ the concept but harder for them to do it! Utilizing the time value of money means that you have to deny yourself in the short-term to benefit in the long-term. You also need to make good decisions with the money you set aside so that it will actually grow in value.


This concept really resonates with me. I was raised by older parents who were part of the ‘Greatest Generation’ – those who lived through the Great Depression and fought in World War II. My parents had experienced economic upheaval on both a personal and national level. They had “done without” on multiple levels, to an extreme that I and most of my peers will never understand. They knew at a gut level what economic uncertainty felt like and they never forgot as long as they lived. My parents were scrimpers and savers and re-users. They gardened for food (and canned and froze and dried everything in sight to store for winter); Mom made my clothes and made quilts for our beds. She saved scraps from old clothes to make new clothes. She saved colorful bits of newspaper to use as wrapping paper. She washed out plastic baggies to re-use for lunches. They understood the time value of money because many of those early earning years were stolen from them – and they never caught up.


I was marked by their experience, in both positive and negative ways, I think. I was unique among my peers, because most of my peers were not raised by parents from that generation. Their parents were younger and had not lived during those years of economic uncertainty. They were the generation who had color television sets, two cars in the garage, and some free time for recreation. They raised their children to enjoy affluence and comfort. I saw my peers squander things that I could never imagine squandering; one part of me envied them and another part scorned them.


This same concept is true for decisions. Think about it – aren’t decisions (and the consequences that follow) a commodity like money? Just like money, you can spend, save, or squander your time and talents. Just like money, the decisions you make can either compound and create bountiful good for you or they can spiral downward and destroy you. And making good decisions early compounds over time, just like good investments do.


I have watched my children make some hard decisions in their lives. Counter-cultural, sometimes unpopular decisions. I can definitely say that it cost them something to do that – just like setting money aside for investing has an upfront cost. When they stand by the decisions and allow the effects to compound and grow, they begin to see benefit over time. I see maturity and affirmation and strength grow in them. They know, from experience, what they are made of and the next hard decision is a little bit easier.


“Do Hard Things: A Teenage Rebellion Against Low Expectations” by Alex Harris is a great book for considering the time value of decisions. In the book, Alex encourages young people to set high goals for themselves and ‘do hard things.’ This process teaches them about their own strength and potential, as well as making a world-wide impact by the things they actually accomplish when unrestrained by apathy. Can this ‘rebellion against low expectations’ take place at any age? Of course! Does it have a more dramatic impact when an individual starts young and doesn’t make excuses or accept mediocrity? Of course!


The time value of decisions is significant because making good decisions early can save a young person from the consequences that stupid, regretful decisions have in their lives. I remember in my community a young man who was driving drunk one night, thinking he was having the time of his life. His car drove head-on into another car and, while he escaped with minor injuries, the occupant of the other car was killed. He spent time in jail, paid restitution, and has had a criminal record ever since. But the biggest impact is the life of regret he’s experienced and the fact that he cannot undo what he has done. Talk about a compounding problem! The trajectory of his life was forever changed in one bad decision. And make no mistake – it was a decision. He certainly didn’t intend to have a wreck or take a life, but he did pick up the beer and car keys. If you back up from that decision, there were earlier decisions as well. Friends he chose. Parties he went to. Lies he believed about freedom and ‘fun’.


Whatever your age, it is not too late to begin investing in some good decisions. Take a moment or two to think about the decisions you regularly engage in and the lies you regularly believe. Interrupt your current path and make a good decision for your future.