Franklin's Gift
"An investment in knowledge pays the best interest"
"Ben Franklin" by perpetualplum is licensed under CC BY 2.0.
Benjamin Franklin, one of the Founding Fathers of the USA, made the news in 1990 for an interesting reason. Before his death in 1790, he had left 4,000 dollars to the cities of Philadelphia and Boston, with each taking half. He included complex instructions on how the money should be used for the next 200 years. The key point was that neither city could spend the capital during two centuries.
By the 200th anniversary of Franklin’s death, Pennsylvania’s 2,000 dollars was worth around 2 million dollars. The city spread out the windfall between a number of different institutions and community foundations. Meanwhile, Boston’s 2,000 dollars had become 4.5m dollars.
During his lifetime, Franklin thought long and hard about saving and investment. He famously wrote: “An investment in knowledge pays the best interest.” He packed a lesson into his will - his gift was really to anyone who cared to pay attention as much as it was to two American cities.
As an investor, Franklin came to realize that compound interest would become even more powerful if it were freed from a normal human lifespan. In his own words: “Money makes money. And the money that money makes, makes more money.”
So, what is the lesson that Franklin wanted to leave to the world? The single most important factor in sensible investment is time. The longer you stay invested, the better.
The big problem for most of us is that we start our lives without much ready cash. We then spend decades working hard and trying to save a little whenever we can. With a bit of luck, people tend to become much more financially secure as they get older.
Franklin’s lesson, though, is that any money that you manage to save when you are young will be more productive than the nest egg you accumulate by the time you have paid off your mortgage. If you take this lesson seriously, you should begin investing as soon as you get your first pay-cheque for your first Saturday job. This is particularly important in a society that doesn’t build enough homes, keeping prices much too high for first-time buyers.
I am not regulated to give investment advice. If you want to know where to put your money, it would be sensible to pay heed to Warren Buffet’s advice to put your money in low-cost index funds. If you want a more hands-on approach, please consult with an investment professional. And please don’t put your life savings in crypto!
Of course, most readers will be hearing about Franklin’s lesson much too late. It doesn’t matter! An old Japanese proverb says the best time to plant a tree was 20 years ago. If you didn’t do it, the second-best time to do it is today. The comments are open. See you next week!
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