A Boring Dystopia

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Why aren't we all getting rich from compound interest? (youtu.be)

submitted 23 hours ago by lobut@lemmy.ca to c/aboringdystopia@lemmy.world

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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

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[–] partial_accumen@lemmy.world 1 points 4 hours ago

Yeah, I was calling out savings accounts cause that’s what I imagine most people are talking about when mentioning compound interest.

I don't think most people think of a savings account as the main example of compounding interest. A bond would probably be a better example.

The video is talking about the false promise of compound interest and I wanted to call out the real reason it doesn’t work.

If you're citing the saving account as the failure of compound interest, it isn't because of a low 5% return, its because its not a fairly consistent return at 5%. If there was a consistent 5% return year over year savings account that would be a great investment even with inflation for the portion of your investment you needed to keep safe. This is essentially what bonds are.