How $5.9 Million Turns Into $30 Million
Every summer on the first of July, baseball fans and finance nerds alike come together to celebrate one of the most interesting contracts in sports history.
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In 2000, the New York Mets owed Bobby Bonilla $5.9 million when they released him from the team. Instead of paying him up front, both sides agreed to a deferred contract. Bonilla would agree to wait a decade before receiving his first payment. Beginning in 2011, he would receive a check every July 1 for $1,193,248.20. Those payments would continue each summer for 25 years.
In total, Bonilla will collect $29.8 million, five times what the Mets originally owed him. On the surface, this looked like a disaster. Did the Mets make the worst deal in the history of baseball? Did Bonilla win the lottery?
Not exactly.
It might sound wild, but economists and financial planners weren’t surprised. The Mets were betting that $5.9 million invested at 8% would quietly grow into enough money to cover 25 years of payments. No lottery needed, just math.
That’s the power of compound interest: your money earns interest, and then that interest earns interest. Over time, even modest returns can grow into something much larger.
Most Bobby Bonilla Day stories focus on how weird the contract looks to average sports fans. But this one’s about how it works and why understanding compound interest might be one of the most important personal finance lessons you’ll ever learn.
Let’s break it down.
The Deal That Made Bobby Bonilla a Household Name
Bobby Bonilla had a solid career: six All-Star selections, a World Series ring, and nearly two decades in Major League Baseball. But he never earned a spot in the Baseball Hall of Fame, and the Mets fans were wildly unhappy with how he was performing in New York at the time. If you know his name, it’s because you’re a suffering Mets fan or because of the contract. You likely don’t know his stats.
At first glance, it might seem like the Mets made a terrible financial decision. Why turn a $5.9 million obligation into a $30 million payout? Their logic was to invest the $5.9 million and let the interest accumulate to the point where all 25 of the future payments were covered. As long as they earned at least 8% on their investments, they wouldn’t need to add any additional money to the account.
The Mets were taking advantage of the power of compound interest. When the money in your savings account earns interest, eventually the interest you earn in the beginning starts earning interest as well. An investment with an 8% rate of return will roughly double in 9 years. Let’s walk through what that looks like:
Each year, you’re not just earning 8% on the original $5.9 million. You’re earning 8% on the previous year’s total, which includes the interest you already earned that year. That’s what makes compound interest so powerful. The longer your money sits, the faster it grows.
Repeat that cycle for the 10 years that the Mets weren’t paying Bonilla, and they would have a bank account with around $12.7 million by the time they had to start paying him. That amount, it also turns out, was the exact amount they would need to fund 25 years of $1.19 million checks.
At least, that was the plan. Ownership opted for this deal because they thought they were earning 12% returns through an investment fund. It made deferring the payment seem like a no-brainer, but it would turn out that their investment advisor wasn’t as reliable as they thought.
When Compound Interest Works for You
It’s probably too late for any of us to become a professional athlete and get a Bonilla-like contract to last us through retirement. But it’s not too late to take advantage of the same math that the Mets were counting on. The key is patience. The Mets didn’t make any payments for the first 10 years of the deal, which gave time for the money to grow. After all, that’s what compound interest does. It rewards people who wait.
You also don’t need millions of dollars to make compound interest work. If you can get an 8% return $5,000, you’ll have about $10,800 in 10 years. Leave it for 20 years? That becomes $23,000. If you can wait 30 years, that same investment would be worth more than $50,000.
The compounding aspect of compound interest means the gains aren’t linear; they’re exponential. The longer your money stays invested, the faster it can compound. Even small differences in time or interest rate can lead to big differences in outcome. Consider the chart below as an example. It shows how a single $5.9 million investment by the Mets grows over 10 years at different interest rates.
Most of us aren’t earning 8% year after year in our savings account, but the message is the same: higher rates help, but time matters even more. But what about inflation, you may be wondering? Future money is indeed worth less than money today. As long as your investment returns a rate that is higher than the inflation rate, say you’re earning 8% while prices rise at 3%, you’re still gaining in real terms.
Bonilla has said that part of his motivation was ensuring long-term financial stability. He knew the risks that athletes face once the checks stop coming in, and he wanted something that felt more like a retirement plan. That part of the deal gets less attention, but it’s just as important. You can do the same thing with long-term savings. The numbers may be smaller, but the math is exactly the same.
Final Thoughts
Bobby Bonilla’s contract gets a lot of attention each summer because it’s unusual, but it’s far from unique. He’s not the first athlete to do this, and he definitely wasn’t the last. For the Mets, the logic was simple: they thought they could earn more by investing his salary elsewhere. Bonilla, meanwhile, gave up the chance to get paid right away in exchange for a stable income stream later.
In other words, they’re doing what any good economist would recommend. They’re thinking about whether the deal was worth the opportunity cost, the value of what they could do with the money if they didn’t spend it today. That’s really what investing is all about. It’s trading today’s dollars for tomorrow’s potential. And the longer you wait, the more those dollars can grow. If Bonilla was really in need of that cash now, he could always call J.G. Wenworth.
Of course, the same math that works in your favor when you invest also works against you when you’re in debt. But that’s a topic for another day. The big takeaway here is that time and money are deeply connected. For now, keep in mind the most annoying personal finance advice you always hear:
The best time to start investing was yesterday. The second-best time is now.
And just so that we’re clear: none of this is financial advice. Investing involves risk, and everyone’s situation is different. If you’re thinking seriously about saving, retirement, or paying off debt, talk to a licensed financial professional.
But if you're thinking about how time shapes your financial future, then Bobby Bonilla Day is a pretty good place to start. Bobby Bonilla never made it to Cooperstown, but thanks to compound interest, he still gets paid like he did.
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Between 1986 and 2001, Bobby Bonilla had 7,213 at-bats across 2,113 games [Baseball Almanac]
Disgraced financier Bernie Madoff scammed investors out of approximately $68 billion [NPR]
The long-term average annual return of the S&P 500 is typically around 10% [Investopedia]
In his first year on the Hall of Fame ballot, Bobby Bonilla received just 2 votes, well short of the 409 needed for election to Cooperstown [Baseball Reference]
The cash freed up by deferring Bonilla’s salary payment helped the Mets sign key contributors to their 2000 National League title [Society for American Baseball Research]
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I love baseball and economics. Students really struggle with future value but I think many of my sports loving students will like this example. I have known about this Bonilla thing, but as in all teaching, there are more examples than time and once we have a good one, we don't look for great ones any more. Thanks for laying it out so nicely.
While I heard this story so many times before, it is the first time I learn about the Madoff connection. Always a new nugget of information.