Posted on 07/22/2015 5:53:43 AM PDT by TurboZamboni
I'm looking for printable charts that show how compound interest works to show young relatives the effects of saving and compare starting sooner rather than later and how having time on your side works.
It would be helpful if it could be changed to various rates and ages to play with the numbers.
(Excerpt) Read more at freerepublic.com ...
Take your pick.
Just create an excel spreadsheet from 1 to n years using different rates for comparison purposes. You could also integrate inflation to demonstrate how it will offset the growth.
The fringe benefit is they'll understand how much damage these near-0% interest rates are doing to people who want to save for their retirements.
I think the Khan Academy is developing free materials in conjunction with Bank of America to teach the topic. FWIW, schools are terrible and it, and have been for so long that most teachers no nothing about money management and finance.
Many investment companies and banks have the ability to generate web charts. I recommend doing a series of charts. Starting at 20, saving $100/month. Then 30, 40, 50 as starting ages. All should have an end date of 65 years old.
Kids like the story of the Indian King, the Prince, and the chessboard. It illustrates the extreme case of doubling your assets each time interval. It always amazes kids.
Except when the "Rule of 72" is trumped by the "Rule of 78".
What’s the “rule of 78”?
I am not sure is these are printable but you can take a screen shot and print them.
http://www.daveramsey.com/blog/investing-calculator?snid=tools.investingcalc#/entry_form
I will tell this story....which relates to a neighbor of my dad. True story.
So, this guy wraps up high school in rural Ala around 1950....has picked up the carpentry trade...gets a job or two, and buys a truck, and within a year...marries a local gal.
He will build a small simple house by 1960...nothing fancy...has around twenty acres for gardening, a couple of cows, and a couple of chickens. He is working by this point for the county board of education as a carpenter and still driving his original truck. Quietly, he puts his savings into CD accounts.
Years roll by....he and the wife never have kids. He never buys a TV....has only a radio in the kitchen area. The wife grows most of what’s eaten and the grocery trips mostly consist of one bag of groceries per week. His beef comes from his own stock.
In the 1970s....he trades in his 20-year old truck and pays with cash for the second truck. In the 1990s, he trades in his 1970s truck and pays with cash for the third truck. Around 2000, he retires and has a marginal pension deal, roughly a $1,000 in social security a month, and a school board health care plan. He’ll buy the 4th and last vehicle of his life (another truck) around age 70.
He passed away somewhere along 2008. His wife had memory lapses and relatives signed up to be a guardian over her, and then had to go into the guy’s estate. Well....this being a guy who never made more $25k a year (near the last ten years of his career)....no one expected there to be much money. The bank laid out the papers. This guy had amply used great CD rates of the 1950s, 1960s and 1970s. These were rates of eight to ten percent for a couple of years. His worth at death was just over a million.
The couple lived a frugal life, never went on vacations, and never had anything of great value in the house other than recliners.
It isn’t just compound interest, as my dad would lay out about this guy. He lived a simple life and didn’t waste money. It is the lifestyle that makes a guy successful in life, saving when necessary and living as a simple person.
Fascinating and enlightening! Was that from a single search?
So, you posted an excerpt of a Free Republic thread...
Is it now on JimRob’s banned list?
Just googled “compound interest” and then clicked on “images.”
That’s a very sad story.
The man lived poorly all his life. What’s the point of dying a millionaire if you never lived like one?
I don’t think he saw it as suffering or sad. He ate the freshest vegetables and fruit that you could imagine. He was a guy without stress. He lived to be fairly close to 80 years old and I doubt if he was on any type of medication for high-blood pressure or such for his entire life. My dad took him on a trip about 15 years ago up in Missouri....farm auction deal. His only trip beyond 100 miles in his life. It was like some adventure to Disneyland for him.
Compound interest works. Or at least it used to. Before the Feds killed the incentive for savings.
Consider. Start with $1000. Add 100 each month. After 30 years you retire with $161,000. IF the interest rate is 8%.
However...
In today’s economy - with interest rates set low to avoid inflation - you’re lucky to get 2%.
In which case the above example nets you only $51,000.
This article has a perfect little chart about seven paragraphs down that really drives the message home.
http://www.daveramsey.com/blog/how-teens-can-become-millionaires/
Buy stock.
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