Bobby Bonilla Day: The perfect example of the power of compounding

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Bobby Bonilla’s contract with the Mets is a brilliant example of the power of compound interest

For former baseball player Bobby Bonilla, July 1 and every July 1, from 2011 through 2035, marks his annual payday, when the New York Mets send him a a check for $1,193,248.20 as part of a deal set up 20 years ago.

In 2000, the Mets cut Bonilla from the team and terminated his contract early. The ball club owed him $5.9 million for that season. Bonilla and his agent chose to defer collecting what was owed and instead agreed to spread the payments out over 24 years, starting in 2011, with an 8% annual interest rate.

When all is said and done, the total payout will be $29.8 million on a $5.9 million initial investment.

Bonilla’s contract with the Mets is a brilliant example of the power of compounding. Compounding is when you earn interest on your earned interest and it can have a powerful impact on growing your money over time.

You and anyone can defer spending your cash by saving and investing it now, giving it ample time to grow. “When you are young, time is your best friend,” says Certified Financial Planner Vid Ponnapalli. “And the magic of compounding is your best resource.”

Putting away money now and combined with the power of compound interest helps you bank some flexibility for later.

Reference:

  1. https://www.marketwatch.com/story/this-retired-baseball-players-contract-is-the-perfect-example-of-the-power-of-compounding-2018-07-16
  2. https://www.marketwatch.com/story/what-is-bobby-bonilla-day-it-is-the-beauty-of-compound-interest-11625145948
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