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There’s a reason why Albert Einstein called compounding interest the eighth wonder of the world! Do you know exactly how it works and how much your dollars could turn into by retirement? The Money Guy Wealth Multiplier can show anyone just how powerful every dollar invested is.
“You want to be rich? Today, we share the secret. Brian, I am so excited about this one because this is like bread and butter for us. This is something that, if you ask me, what’s the one thing that I get excited to tell young people about, to teach people about investing, it is this very thing. Because it can light a fire under the right person when they hear it the right way. I want you to lean in, seriously. If you are aspirational, if you want to have more and make the most out of your money, this is what you need to know. You need to know about the eighth most powerful thing, the eighth wonder of the world. That’s what Albert Einstein called it: compounding interest. We’re going to tell you how to build your wealth off of all the power and harness it completely, so you can maximize your money.
Now, this is what makes compound interest so wonderful. You know, we talk about it all the time, how it can be a devastating force to your finances when you think about credit cards and high-interest debt. It can absolutely be napalm for your finances. However, when you let compounding interest start working for you, when you let it be the wind at your back on your wealth-building journey, it is amazing what can happen when it comes to your financial picture. Yeah, we wanted to jump in because this is the thing that, um, we’ve… By the way, stay tuned because we have a brand new deliverable we’re gonna unveil on today’s show, as well as a hub so that you can get all of your questions answered. This will load you up completely.
But here’s what I get so excited about: This was the concept that changed my life. I had an economics high school teacher, the Morrow moment, if you will, where Mr. Mara Hood shared, “Guys, if every one of you high school students would save $100 a month, you could be a millionaire.” So, with that one statement, he turned something that seemed very elusive and not possible to where it sat right in front of me with a very simple path. And the question you might be asked is, okay, well, why does it seem elusive? Why does something like that sound so impossible? And it’s because of the way our minds work. When we think about our brains and we think about the way that we think money grows, we sort of think in this linear fashion. Okay, if I’m at Point A today, well, if I do this, then I’ll get to Point B, and then I’ll get to Point C, and I’ll just kind of step in a linear fashion forward.
However, when it comes to investing, when it comes to growing our money, that is not the case. Yeah, compounding works completely different than a linear fashion. Instead of one, two, three, four, five, now you’re talking about two, four, sixteen, and then you keep stacking everything. It’s, you know, it’s exponential. That’s exactly right, in a lot of great ways. If you look, we actually showed an example of what this looks like if you compare and contrast the two differences. We have how our mindset thinks, and then we have the reality.
So that’s why if you can actually let your money do the heavy lifting, you do the saving and the discipline, but if you do the work of letting your money work for you, it can actually be up to 95% of your total account value when you retire 30 or 40 years in the future. And look, we love it so much, it’s the reason why you see us carrying these Koozies around. It says, “This one-dollar beer cost me $88,” because we know that a 20-year-old has a wealth multiplier of 88.35. That means that every dollar that a 20-year-old invests, if we assume a 10% rate of return compounded on a monthly basis, can turn into $88 by the time they get to 65. It is amazing how powerful your dollars can be if you give them enough time to grow. Yeah, by the way, when we say compounding monthly, this is one of those things because people, you pay attention to the details. You’re financial mutants. We’re not talking about $10 a month that would put you up there with all the billionaires on the planet. But here’s what we do mean. You’re gonna make 10% annually, but it is compounding on a monthly basis, meaning there’s 12 months in a year. Get your financial calculators calibrated or stick around, and we’ll tell you about the money multiplier, the wealth multiplier hub.
Okay, so think about this, right? We talk about one dollar can turn into 88 dollars for a 20-year-old. But that’s not the way that we often think about building wealth. That’s not the way that we think about growing our money through time. Let’s talk about, like, a practical example. How can we illustrate what this looks like in real life? What this looks like in practice? So think about this. If you were to start at 20, and your goal is, “Hey, I’m starting at 20, I’m going to save every month until I get to retirement, until I get to age 65, and let’s just assume that on average, I can make 10% a year, how much will different savings rates allow me to end with?” Well, let’s not just talk about 1.88. If you start saving $20 a month now, Brian, when you were crew chief, you are the leader, you are the guy at Hardee’s in high school, you could probably do $20 a month. Oh, for sure, you could have done that. So, $20 a month saved every month from age 20 to 65 can turn into almost $210,000 by the time that you get to age 65. Yeah, $50 a month could get you up to a little over half a million dollars. $100 a month, there’s my Morrow moment. You’ve talked about being a crew leader for Hardee’s. That’s a million and forty-eight thousand dollars. So, Mr. Morrow actually undershot. If we started it—I think I was 16, 17 years old at the time—I’d have been worth a lot more than a million bucks.
And look at this, if you save $200 a month as a 20-year-old, you’d have close to $2.1 million dollars. I think that’s just so worth reinforcing that even as a 20-year-old, somebody at the very beginning of your career, maybe you’re not even done with school yet, maybe you’re just working part-time. I know that when I was a waiter at Chili’s, Brian, I could have saved $200 bucks a month. And just by implementing that very simple behavior early on, I would have been setting myself up to be a multi-millionaire in retirement. It does not take a lot; it just takes a little bit of discipline and a little bit of money and a lot of time, and you can build wealth.
But a lot of you watching this, you’re not 20 years old. You’re like, you know what, is this what does this mean for a 27-year-old? What does this mean for a 34-year-old? Guys, don’t worry; we got you covered. I want you to go to moneyguy.com/resources. We have a brand new deliverable. That’s right. Yes, we’ve always in the past had a wealth multiplier, and you’ve heard us talk about it numerous times. But then we also had the wealth multiplier for young savers. You know, like, let’s modernize it. So let’s actually bring these two resources together, so that way, young, old, it doesn’t matter; we have a resource for everybody at moneyguy.com/resources.
I’ve actually hot off the laminator press. I mean, look at this thing, three pages of beauty and just brilliance that we can motivate you with on how you can be wealthy and load yourself up. So go download it right now. And what I think is so wonderful, maybe you are the person that wants to know what your wealth multiplier is, or maybe you influence young people, maybe you have children you want to get them excited about saving, maybe there are college students that you want to start on the right track. This is a great thing to send to them to say, ‘Hey, just so you know, this is how powerful your dollars can be.’ But maybe you’re out there saying, ‘You know, okay, I need to know a little bit more. I understand the deliverable, but I kind of trust but verify. I need to understand what goes behind that.’ We actually have a brand new area on our website that we’re calling the Wealth Multiplier Hub, where you can answer all questions about the wealth multiplier. So if you go to moneyguy.com and type in ‘wealth multiplier,’ if you go to Google and type in ‘wealth multiplier,’ you can find our Wealth Multiplier Hub, and it will answer some very valuable questions.
Questions like, ‘Okay, what’s the actual formula? Like, if I want to calculate the 88, how do I go about doing that?’ Or, ‘You said 10%, that’s 10 percent seems crazy. Why would I think that I can get 10%? What if I’m 40, am I still getting 10%?’ We talk about that on the hub. Maybe you even have the question about inflation. What does inflation mean for my wealth-building journey? Even that is addressed on our Wealth Multiplier Hub.
Yeah, I think anybody who goes out there, like I said, moneyguy.com, go in the upper right-hand corner, there’s a search bar, just type in ‘wealth multiplier,’ we’ll load you up. I mean, anything and everything you could think about this topic will get you excited but also get you educated on it.
But I also want to give you another little thing that I think is a little Easter egg for Money Guy family. Daniel created a Baby Buffett. I love it. If you go out there, right, I know it’s sitting out there on Instagram too, and if you gotta know how much entertainment this brought to the entire firm, here is—you’ll see Daniel’s art rendition that he had created just to show you that one dollar invested for Baby Buffett could be worth $647 at age 65. That’s pretty powerful stuff. Absolutely amazing, we love it. So if you’ve not checked out the Wealth Multiplier Hub, go check that out, go to moneyguy.com/resources, and download the new deliverable.”
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