General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsRemember Back When We Were Brainwashed That "Compound Interest" Would Make Us All Millionaires....
I'm 65 y/o now - and I remember back 40 to 45 years ago when we were being told about the magic of 'compound interest'. They told us if we put our money in the bank and saved that our money would be making money for us. There was a magical formula that show how $1000.00 if put in a bank and never touched and if you continued to save money every month - that by the time you were retiring you would be a millionaire.
Well it turns out that the only ones benefiting from 'compound interest' are the banksters, credit card and loan companies. I heard the other day about a student that took out a student loan and owed $30,000. They began paying it down when they graduated and got a job. The lo an behold they lost their job and because of the magic of compound interest - they now own in excess of $100,000.
See what I mean.
What is the interest on credit cards these days?
Compound interest now to me seems like a big scam. Sounded good but was unrealistic. But somebody made money on my money. It wasn't me.
hollysmom
(5,946 posts)I can't say I am a millionaire, but I do have savings, I was laid off in my 50's and made it to social security on savings alone. The key seems to be - don't have kids, they bleed you dry.
global1
(25,239 posts)what's the interest you can earn at your bank? Even CD's pay low interest now as compared to when we were being told about the magic of 'compound interest'. If you can live off your savings - more power to you. You must have had a lot stashed away.
hollysmom
(5,946 posts)but I will be crying next year when I have to renegotiate them. I just turned over an IRA CD and got 1.89% at a small local bank when all others were topping out at .75% at the big banks. Moving all money to small banks! Just hope they don't go under. I am pulling money out of my 401Ks because the fees are just too much, not making anything on them now.
On the other hand, there are many long term diseases in my family, so I also have a long term care savings account. If I just die, that is money wasted, if I live long enough, it will pay off.
when I divorced about 20 years ago, I took the house and gave my husband all the savings, which was considerable, so I have a paid off house, I had 10K in an IRA - but then I spent 10 years working 60 hours a week and taking care of sick parents and had no life, so I save 50-75% of what I earned for 10 years and I am frugal. Yes, I lost wonderful years of my life when friends were traveling, but I did love my parents and treasure the time I spent with them in the end as well, so it was a trade off. I live on SS plus a supplement form my 401K's now. And I have a very small pension( long story, short, they keep trying to give me a lump sum, but I won't do it, like getting that monthly check. plan to live long enough they pay through the nose).
global1
(25,239 posts)which doesn't seem to square with your comment about "don't have kids, they bleed you dry". Is Holly your pet or a daughter?
hollysmom
(5,946 posts)when I go to the dog park, people know her name,but not mine, I am holly's mom to them.
I did not mean to offend with the kids bleed you dry, but that is what my brother always says to me about my having savings and him being broke all the time. His kids want for nothing, but they are counting on me coming through for their college fund. I have been putting money away since they were born. I just suggest they not plan on going to an expensive college unless they get a scholarship.
Blue_Tires
(55,445 posts)global1
(25,239 posts)it helps make my point.
I also failed to mention 'inflation' over the 40 - 45 years in my original post.
geek tragedy
(68,868 posts)by investing it.
jakeXT
(10,575 posts)---
Economies change their shape as they grow. This shape is distorted by the inherent tendency for financial claims bonds, bank loans and other financial securities to grow more rapidly than the economys ability to carry them, much less to pay them off. The volume of such claims tends to grow by purely mathematical principles of self-expansion, independently from underlying economic trends in wealth and income, and hence from the ability of debtors to pay.
The task of economic regulation is reduced to setting an appropriate interest rate to keep all the economys moving parts in equilibrium. This interest rate is supposed to be controlled by the money supply. An array of measures is selected from the overall credit supply (or what is the same thing, debt securities) to represent money. This measure then is correlated with changes in goods and service prices, but not with prices for capital assets bonds, stocks and real estate. Indeed, no adequate statistics presently exist to trace the value of land and other real estate.
The resulting economic models foster an illusion that economies can carry any given volume of debt without having to change their structure, e.g., their pattern of wealth ownership. Self-equilibrating shifts in incomes and prices are assumed to enable a debt overhead of any given size to be paid. This approach reduces the debt problem to one of the degree to which taxes must be raised to carry the national debt, and to which businesses and consumers must cut back their investment and consumption to service their own debts and to pay these taxes.
Excluded from the analysis is the finding that many debts are not repayable except by transferring ownership to creditors. This transfer changes the shape of the economys legal and political environment, as creditors act as rentiers to subordinate labor and capital to the economys financial dynamics.
...
http://michael-hudson.com/2004/01/the-mathematical-economics-of-compound-rates-of-interest-a-four-thousand-year-overview-part-i/
msongs
(67,394 posts)Egalitarian Thug
(12,448 posts)but without even the slim chance of hitting a jackpot.
& R
Mojorabbit
(16,020 posts)and watched the interest accumulate. Then they started charging for the privilege of even having an account. Fees mounted. I don't know if they even offer them anymore.