More articles by Neil SmithBenjamin Franklin was the Genius of Compound Interest … by neil smith12/27/07
Ben Franklin was a lot of things - A founding father of America, Inventor, Entrepreneur and financial genius.
At the ripe old age of 77 Ben Franklin got a wild hair and added a couple of new heirs into his will and this action would continue to be a philanthropic source of good will for the next 200 years. He added a section to his will that gave $5000 each to the cities of Philadelphia and Boston with stipulations that the money be used to provide loans to the young and poor and that the borrowers had to pay the debt back within 10 years at an interest rate of 5%.
Ben allowed that the cities, after 100 years, would be able to use a half million dollars from their respective funds for public works while the remaining funds would continue on in the same fashion (loans to the young and poor at 5% interest) for another hundred years. At the end of the 200 year term, each fund was worth 20 million dollars thanks to the 9th wonder of the world, compound interest!
OK - WHAT DOES THIS MEAN TO YOU!?
Need to save for retirement? Put a kid through college? Establish a safety net? With some time and the genius of compound interest, you could simply throw your pocket change in a dish nightly and then deposit it in a bank account at the end of each month. Maybe keep a bin at your home for recyclable bottles and cans and go collect the deposits on them on your way to the bank each month and add that money into that account as well. When you have enough saved, move that money somewhere where it can grow at a better interest rate, and in some cases, tax-free (401k, Roth IRA, certain college savings plans). You’ll be amazed at what a lil’ chump change can do! Maybe even put a kid through college!
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