This is what I'm trying to teach my grands! Show this video to your teenagers. The miracle of compounding interest.

[RSKY]

This is what I'm trying to teach my grands! Show this video to your teenagers. The miracle of compounding interest. He says this is a free video so I hope I don't get into trouble posting it here.

246K views · 7.3K reactions | Eight years. That’s all I ask. #money #wealth #finance #tyler | Socialcapofficial

Eight years. That’s all I ask. #money #wealth #finance #tyler

www.facebook.com

 

[CalG]

A 6% return with 6% inflation gives you only a 0.76% real return—scarcely wealth-creating.

As we age, "A penny saved, is a penny wasted!"

 

[Torvy]

The S&P has averaged 7% more than inflation over any 50 year span.

No need for videos. Teach your kids and grandkids how to use a spreadsheet.

I showed my students how compounding interest works and gave them the spreadsheet so they could enter their own data.

Give this a try. Imagine earning the federal minimum wage for 50 years (about the time from adulthood to retirement). Deposit only the money currently taken for SocSec (12.4%) into a 401k S&P fund. Don't take it or move it until retirement. The value, adjusted for inflation, is just shy of $850,000. Without adjusting, it is over $2.5 Million. The amount deposited is only 11% of the total. The gross wages for those 50 years is $754,000 (2080x7.25x50).

This example is for 40 hours a week. No OT and no raises for 50 years. In other words, it is a low-ball figure. The vast majority of people will make considerably more over their lifetimes. Only 1.1% of Americans make $7.25 or less.

 

[Suburban Plowboy]

What bank is giving anyone 6%? This is 2025, not 1975.

 

[Torvy]

This is 2025, people don't put their money in a savings account to earn returns. That money is just for liquidity.

 

[CalG]

CD's don't pay 6% either.

So that leaves "the market" and "the risk".

playing in the market is NOT the same as compound interest ...

funny how this same trope gets defended with the wave of a hand.

Can someone point to a "interest bearing savings" instrument that bests inflation by any meaningful amount?

 

[Torvy]

The broad market has a long and consistent history of 10%+ returns.

People lose money when they speculate on individual stocks or panic and pull their money when there is a dip.

 

[Larry Caldwell]

The broad market has a long and consistent history of 10%+ returns.

Not over an 8 year span.

 

[Torvy]

What does an 8 year span have to do with income earning investments?

Chunk out any 50 year span.

 

[hayden]

Here's the real explanation from about 60 years ago