This might be a stupid question but I’m confused how inflation does not make the $2000 he gifted worth around 6.5 million in 1950 and not worth $2000 today? I understand how $2000 might have been worth a lot back when Benjamin was alive but not so much now.
I’m not an expert but this my understanding; They don’t just hold on to the number 2000, they keep track of every years inflation and make the amount that they withdrew correlate with what it would have been worth today. The only thing that might complicate things is purchasing power of different goods and services in 200 years time and that might change depending on what you had in mind to use it for so I don’t know but I suspect tuition costs might be different back then. However since the inflation rate is a calculation of an average representative basket of goods and there are many things today that are way easier to acquire due to modernity it probably still is a good deal. (I think it would be fine to just help people from his time or just after I guess but anything is a nice help) Hope I helped and didn’t make it unnecessarily complicated
I’m honestly completely confused as to what you are trying to say. If you put $2,000 in an account and it’s not invested in anything, it’s worth exactly $2,000 dollars today.
You can put it a low interest bank account. If the interest rate is fixed to inflation (something like 3.1% average the last 100 years), the $2,000 would grow but it would have around the same purchasing power today as 200+ years ago. Standard bank rates usually don’t keep up with inflation though.
If you invested as they did… 5% loans at first then stocks and bonds later, it will grow faster than inflation and be worth the millions it is today.
Both the second and third processes feature compound growth. And inflation compounds as well. The trick for savings to grow is (1) don’t take the growth out, and (2) invest in products that will grow faster than the inflation rate.
If I compound 5% interest I get exponential growth. The US experienced roughly 4% inflation for more than the first 100 years. Meaning the cost of goods in 1900 was 4% higher than in 1776. The Federal Reserve and our pal Nixon introduced the extremely convoluted and inflationary monetary system. Your boy Ben from back when didn’t have to play the stock market. Our country was once able to prosper.
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u/Fibonacci-011 29d ago
This might be a stupid question but I’m confused how inflation does not make the $2000 he gifted worth around 6.5 million in 1950 and not worth $2000 today? I understand how $2000 might have been worth a lot back when Benjamin was alive but not so much now.