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Financial Fastlane Tip – The Incredible Power of Compound Interest

By LINDON, Utah - March 21, 2018 No Comments

 

Here's another investment tip from the Financial Fast Lane. A penny saved is a penny earned. Of course, this is a quote attributed to Benjamin Franklin. He knew that unless you put your pennies to work in the marketplace, you'd never earn any more of them. Franklin espoused many great principles on wealth creation, and one of those was the incredible power of compound interest.

I love this Benjamin Franklin quote: "Money makes money, and the money money makes, makes money." Unfortunately, with everything today available to us in a nanosecond, the idea of having to wait for something, like putting our money to work and not spend it, is alien to our I Want It Now attitude. And it doesn't help that we watch our government spend and print more dollars, and rack up more and more debt. Even though I keep telling my kids, "Money doesn't grow on trees," our government sure makes it feel like it does.

Ben Franklin, who wanted to show the world the importance of putting our money to work, did something that I think is quite extraordinary. Franklin wrote into his will that each of his two favorite cities, Boston and Philadelphia, were to receive a one-time gift of about $4500 that they had to invest, not spend. Only after a hundred years could each city withdraw 75% of the balance. Then, after another hundred years, they could withdraw and spend the balance.

So, in 1890, a hundred years after his death, each city withdrew 75% of the money. Then, in 1990, each city received the balance. Are you ready for this? It was nearly $10 million. That, my friends, is the power of compound interest.

I hope you're looking at your portfolio, and making sure that you're maximizing your ability to create and preserve your wealth. I hope you're making your pennies work for you, instead of you working for pennies. Remember, a penny saved is a penny earned.