Albert Einstein was arguably one of the most brilliant thinkers in the twentieth century. Einstein might have more to offer today’s thinking saver than just compound interest. Whether he said these words or something similar is relevant only to purists who say serious journalists shouldn’t attribute quotes willy-nilly to emphasize their importance. It doesn’t change the fact that compound interest should be on the mind of anyone looking to build wealth over time. Compounding is a repetitive process that can magnify gains — or expenses — over the long term.
Over the years, I’ve read Einstein quoted as saying that ‘compound interest was one of man’s greatest inventions’, or other variations on this theme. In Tony Robbins recent tome (600 pages to write what would fit in a short magazine article) he offered this Einstein line. I’d like to know if it was made up or if Einstein ever said anything close to this. Connect and share knowledge within a single location that is structured and easy to search. Stack Exchange network consists of 183 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.
- Higher interest payments obviously increase expenses, but the opportunity cost might be even more important.
- He clearly sees the importance of cognitive ability and education for growing human capital, which has a positive effect on options for long-term wealth.
- The label “eight wonder” was applied to compound interest in an advertisement for a bank in 1925.
- He said, “The 8th wonder of the world is compound interest.” Unfortunately very few people understand the magic of compound interest.
- Einstein might have more to offer today’s thinking saver than just compound interest.
Albert Einstein, the theoretical physicist, is best known for discovering the law of relativity, but he clearly knew a thing or two about investing as well. What we can appreciate from Einstein’s philosophy is that society is as important as the individual, and individuals, particularly those who are successful, can help society to a greater extent without sacrificing their success. Also, regulations free from corruption help guide capitalism so that opportunities are available for more citizens. Despite his world travels and, especially later in his life, his ability to command top salaries and fees, he maintained modest living environments. His breakthrough in the understanding of the physical universe came from his ability to imagine how the world might work, and then ask himself questions and solve problems to determine which theories could be tested.
Compounding expense
Over five years, just 18 per cent of your total return comes from share price growth, with dividends making up the rest. In the long run, it is the compounding effect of reinvesting dividends that really makes you rich. Say you invested £100 (Dh590.82) in the UK stock market way back in 1899. If you spent all your dividends, it would what is an original issue discount oid be worth £22,239 in today’s money, according to the long-term Barclays Equity Gilt study. But if you had reinvested them, it would be worth a massive £1.63 million. Dividends are particularly important in today’s turbulent economy when growth is much harder to come by, says Dan Dowding, the chief executive of IFAs Killik & Co in Dubai.
Disdain for cult of personality
In some countries, if our parents were poor servants, we’d be poor servants, too, without any economic mobility. He didn’t like the militaristic nature of his schools, where pupils were not encouraged to ask questions, and learning was affected through rote memorization. The young Einstein had no interest in this type of training to blindly worship authority. He believed that humans were given brains so they could do much more than trust received knowledge unquestioningly. The chart below illustrates the growth over a 30-year period for an account with simple 5% annual interest. The annual return grows from $5,000 in year one to nearly $20,000 by the final year.
Albert Einstein’s Philosophies For Growing Wealth
He might have; the sentiment matches what seems to be this particular genius’s sense of humor. If you tax identification number are the someone “who earns it” from Einstein’s quote, then you are utilizing a powerful force to build assets. Generating income on interest that you’ve previously earned can totally transform a retirement plan for the better. The quote, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it,” is often attributed to Albert Einstein.
I early inquired the rate of interest on invested money, and worried my child’s brain into an understanding of the virtues and excellencies of that remarkable invention of man, compound interest. If Columbus had of placed one single dollar out at 6% interest compounded annually with instructions to pay the proceeds to you today, you would have over Ten Billion Dollars coming to you. Old Grandpa Rockerfeller the multi-millionaire who preached thrift said something I never forgot. He said, “The 8th wonder of the world is compound interest.” Unfortunately very few people understand the magic mental health billing of compound interest. Quote investigator also found some earlier quotes claiming that compound interest is the “greatest invention”, but none of them involve Einstein in any way until well after his death.
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Being thankful for these opportunities is certainly one reason not to throw it away by making bad decisions with money. It may be difficult, but financial independence is within reach for anyone who wants it although there can be unavoidable external situations making it more difficult or impossible for some. But for at least those reading Consumerism Commentary, there should be enough opportunity to move towards financial independence. Albert Einstein definitely leaned towards the socialist end of the economic spectrum, but he always emphasized the important of individual freedom, democracy, and personal liberty. He was not a fan of communism in Russia, nor was he a supporter of German fascism or nationalism. The United States was politically the best environment for him, particularly with his belief that art and science relied on the availability and encouragement of individualism.
For the most part, he let other scientists worry about the testing part, giving himself room for his thoughts to consider the world in ways no one had considered it previously. Authority figures, like professors who lecture without open discussion and politicians, don’t always deserve to be trusted. And from a consumer perspective, we have to resist the temptation to consider salespeople authority figures or experts. Salespeople can cleverly disguise themselves as advisers, and skepticism helps protect people from making poor financial decisions. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.