Just let your wealth compound over time and you’ll be a millionaire, the advice goes. If this is true why aren’t more people rich?UNDERSTAND, SHARE & PUSH BACK
This doesn’t need to be a 20 minute video.
While money in a bank does technically grow exponentially, the real value (what you can buy with that money) of the account grows slower than the economy.
Meaning each year you can actually buy less with the money you keep in a bank account. This is why retirement accounts are typically tied to the stock market, to try to tie their growth more to the economy.
Most of the video applies to a Millennial and younger audience. These generations got screwed on the necessary components for compounding to work. Forced to pay for exponentially more expensive education than generations prior put them deep into debt right out of the gate. Further, they entered the workforce during the Great Recession which forever put them 10 to 15 years behind in earning power. Lastly, saddled with the two other things, it prevented many from buying homes which appreciate in value.
In short, the younger generations got totally screwed. The compound interest promise still works for X-ers and above.
I agree with the very ending premise: We need to massively tax the ultrawealthy.
It takes money to make money and I ain’t ever had the money needed to make more.
That’s because what it takes is time, a resource we are all limited on. The only way to accelerate it is to have a head start like already being rich or having money seeded from family or have enough spare income early on to front load it for growth. Instead, most start with nothing, make the least when we’re young, often not being able to even start saving and accruing interest until we’re older, and when we make the most money is near our retirement when that money has the least amount of time to accrue interest before we start eating into it to live off of. If you front load it with a lot of money you could line just off interest alone.
No amount of time will make you wealthy through compound interest with the current economic system.
While your money does grow in a savings account, the rate of growth is lower than the economy or real value of the money.
Just think about what a million dollars could have bought you in the 80s vs 00s vs now.
Yes your interest does also need to outpace inflation. Not seen a savings account that pays interest of anything like that right now. Nothing low risk is keeping up with inflation.
That’s the thing, interest rates are almost always less than inflation. The only reason they flip is because inflation needs to be brought down.
The reason for this is that the government/economic model is designed to encourage spending. Holding money is effectively lost “opportunity” so the real value of the dollar is always pushed down.
That’s because what it takes is time, a resource we are all limited on.
And patience, a quality most people lack.
There’s not enough patience in the world to make compound interest work for someone who lacks the expendable income upfront
You’re not wrong.
But there’s also definitely not enough patience on the part of people who do either.
Systemic failures aren’t character flaws.
Go knit that on a pillow, friend.
It’s not an argument. It’s a platitude.
It’s a statement of fact, you’re just butthurt because it’s a fact that completely destroys your delusional bootstraps bullshit
I need compounds for there to be interest.
Gary’s Economics is an incredible channel
