Sunday, February 4, 2007


We started holding Dave Ramsey’s Financial Peace University seminar in our home. The first lesson was about saving. I always find the concept of compound interest amazing. My favorite example is about the two twin brothers. One starts saving $2000 per year at age 19 but stops saving at age 26, not touching the money and letting it grow. The other twin starts saving at age 27 and continues saving $2000 each year until age 65.

Question: Guess who ends up with the most at 65? The first twin who saved $16,000 early or the second brother who saved $78,000?

Answer: The first twin who started early winds up with substantially more. They both end up retiring as millionaires but the first does better since his money had more time to grow exponentially. With time, the principle of compound interest becomes the miracle of compound interest.

I understand the math. I can do the math. I can even teach the math. However, I have trouble getting my brain around the results of the math.

The lesson? Anyone who saves and invests consistently will do well, but if begun early, the results will be even more spectacular.

Last fall there were some young men taking the seminar. They saw this same lesson. They each had audio CD’s of the lesson to listen to later and a book that showed step-by-step, year-by-year how the money grew. They were told that they had just been taught how to become millionaires. They could end up as millionaires in terms of what the dollar buys today. They could do so without much sacrifice or trouble. Older people in the class exhorted them to start saving NOW.

They were even told how an undisciplined person could save in a disciplined manner.

If these young men would just consistently save 10 to 15 percent of their income, they would all become multimillionaires. They could live comfortably when retired, no matter how long they live, and still have loads of money to give away or to bless their children and grandchildren. They could create a legacy and change their family tree - the pattern of their descendants for generations. The possibilities are endless.

This is mathematics, not theory.

This is a no-brainer!

Did these kids start saving and investing? I doubt it. I can only speculate as to why. Maybe they are so imbued with a spirit or attitude of poverty that they cannot believe this or take it seriously? Maybe they are too immature to appreciate minor delays of gratification for huge future gains?

I admit that my generation is dumb. Most of us did not know these things when we were young. Which is worse, to not save and invest due to ignorance or to not save and invest despite knowing better and being without excuse?

Which is the dumb and which is the dumber generation?

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