The Ten Percent Solution

 

month, a dollar a day, will magically turn into more than two million. And do you know what's even more impres-sive? You know someone who has done it," Roy said proudly.

"Thirty-five years ago, I started my savings with thirty dollars a month, which was approximately ten percent of my earnings. I have achieved just under a fifteen percent average annual return. In addition, as my income rose, my ten percent savings component rose accordingly. Thirty dollars a month became sixty dollars, then a hundred, and eventually hundreds of dollars a month.

"You three are looking at a very wealthy man."

"Are you trying to tell us that by saving ten percent of every paycheck you've turned yourself into a millionaire?" an intense Tom demanded.

"Precisely," was the incredible response.

Roy Miller, a millionaire? To the best of my knowledge, I'd never met a millionaire, and I sure didn't expect my first to be my barber. Roy was clearly deriving great pleasure from the disbelief on our three faces.

"Compound interest—mind-boggling, isn't it?" he went on. "When the Indians sold Manhattan to the Dutch for beads worth twenty-four dollars, it seemed that the natives got taken. But if they had invested that money at eight percent interest, today their investment would be worth trillions of dollars."

"Have you ever thought about buying Manhattan, Roy?" Cathy teased.

"It's a real tragedy that most people don't understand compound interest and its wondrous powers. Take your dad, Dave. If he had started his program at the same time I did, you'd be looking at a big inheritance down the road."