Compound interest is such a powerful thing that Albert Einstein called it the most important invention in all of human history. Why do so few take advantage of it?
Why do Bill Gates, Warren Buffet and many others set up foundations? The following story told in ” Money Master the Game”, by Tony Robbins will make the point.
When Benjamin Franklin died in 1790, he left $1000 each to the cities of Boston and Philadelphia. His bequest came with some strings attached: specifically, the money was to be invested and could not be touched for 100 years. At that point each city could withdraw up to $500,000 for designated public works projects. Any remaining monies in the account could not be touched for another 100 years. Finally, 200 years after Franklin’s death each city would receive the balance– which in 1990 amounted to $6.5 million, with no money added over all these years.
How did it grow? Through the magic of compounding.
If this money was just held in his accounts, income taxes would made this accomplishment considerably less interesting. Today people with large IRA’s must plan not to be taxed over 75% at death.
This is why wealthy people plan, set up foundations and make charitable gifts. The power of compounding greatly magnifies their efforts.
For others planning for retirement the magic of compound tax free interest can provide true financial independence when you meet your monthly tax free interest goal.
A successful plan begins with thought. Ben Franklin was a long term thinker. We must teach our children and help guide others to use the power of compound interest. Most people in our society are not focused on this.