Growth on growth

Introduction

0:04HouseholdWhy does everyone say start early?

0:07To answer that, this film looks at how money grows on its own growth, what waiting costs, and what grows against a family. It starts with a will, in 1789. In 1789, Benjamin Franklin, the printer, scientist and one of the founders of the United States, added a new part to his will.

0:29He left a thousand pounds each to Boston and to Philadelphia, to be lent to young married craftsmen, at five per cent a year. As the loans were paid back, the money was to be lent again, and again, for two hundred years. He worked out what it would become.

0:47For Boston, after two hundred years: more than four million pounds. By 1990, Boston’s fund was worth more than four million dollars, and Philadelphia’s about two million. Less than his sum, as this film will show, but a long way from a thousand pounds. Franklin was counting on one idea: money that grows on its own growth.

1:14I’m Freya, Finna’s AI chief of staff.

The rule of 72

1:19The idea was already old. Merchants had a rule for it. In 1494, in Venice, Luca Pacioli, a Franciscan friar and teacher of mathematics, printed a great book of arithmetic. It was the first printed book to explain double-entry bookkeeping, the way merchants kept their accounts.

1:41And it gives a rule for how long money takes to double: keep 72 in mind, and divide it by the rate. He did not explain why it works. It is a rule of thumb, and still a good one. At six per cent a year, 72 divided by 6 is 12: money doubles in about twelve years. At three per cent, about twenty-four years. At nine, about eight. At twelve, about six.

2:10The rule is close for most everyday rates, and less exact at very high ones. Two words from this chapter. The rule of 72: divide 72 by a yearly rate, to see about how many years money takes to double. And a rate of return: how much an investment gains in a year, as a share of what it was worth.

Why the curve bends

2:36Why does the rule work? Because the growth grows too. Take ten thousand dollars, earning six per cent a year. If only the first ten thousand earned, it would add six hundred dollars a year, the same every year. After thirty-six years, about thirty-one thousand. But if each year’s gain is left in, it earns too.

2:59After thirty-six years, about eighty-one thousand. That is compounding: returns earning returns. Seen as doublings: about twenty thousand after twelve years, forty thousand after twenty-four, eighty thousand after thirty-six. The first doubling added ten thousand dollars. The last one added forty thousand.

3:26So the later years do most of the growing. That is why growth speeds up with time. Franklin knew the idea well. In 1785, he wrote to his friend Richard Price, a Welsh minister and mathematician, about a little book that showed, in his words, the immense powers of compound interest. Four years later, he wrote the idea into his will.

3:54Two words from this chapter. Compounding: earning returns on earlier returns, not only on the money first put in. And simple interest: interest paid only on the money first put in, the same amount every year.

The cost of waiting

4:11If the later years do most of the growing, then time is what waiting costs. Ten thousand dollars at six per cent, left for forty years, grows to about a hundred and three thousand. Started ten years later, and left for thirty, it grows to about fifty-seven thousand. Ten fewer years, and almost half as much: waiting gives up the last doubling, the biggest one.

4:36Starting later still works. It just has a shorter time horizon: the money compounds for fewer years, so the same goal takes more money, or more years. Franklin’s funds show the other side. Compounding only works while the money keeps earning. His plan needed young craftsmen to borrow and repay. Over the years there were fewer of them, and the loans were not always made.

5:03After a hundred years, as he had asked, much of each fund was spent: in Boston, on a school for trades, built with help from Andrew Carnegie, the steel industrialist. Each pause, and each payment, meant the growth started again from less. One word from this chapter. A time horizon: how long money can stay invested, before it is needed.

What compounds against you

5:31Compounding does not care which way it works. Three things compound against a family. Costs. A yearly fee is taken from the money, and from everything that money would have earned. Inflation. Prices rise, so each dollar buys less.

5:49At the two per cent a year that the Federal Reserve aims for, prices double in about thirty-five years. And debt. A balance that is not paid off grows on itself. In mid-2026, American credit card rates averaged about twenty-one per cent a year. At that rate, an unpaid balance doubles in about three and a half years.

6:12The SEC, America’s markets regulator, shows what costs do with a hundred thousand dollars, growing at four per cent a year for twenty years. With a yearly cost of a quarter of one per cent, it ends at about two hundred and eight thousand. With one per cent, about a hundred and seventy-nine thousand.

6:31The difference is almost thirty thousand dollars. So what counts is the return after inflation, the real return. Six per cent, in a year when prices rise two per cent, is about four per cent of real growth. Three words from this chapter.

6:52A yearly cost: what an account or a fund charges each year, as a share of the money in it. Inflation: prices rising over time, so the same money buys less. And the real return: the return after inflation, how much more the money can buy.

In a family’s office

7:11A family office watches compounding, in both directions. A household can do the same, at its own size. It writes the rate beside everything it owns and owes, on its record. It writes down what it pays in costs each year, so the drip can be seen. It leaves its long-term money alone, so the later doublings can happen.

7:34It knows which of its debts costs the most, because that one compounds fastest against it. And it starts with what it has. Ten years from now, today will be the early start. One word from this chapter. Long-term money: money that will not be needed for many years, so it can be left to grow.

In short

7:59So, in short. Returns earn returns, so money grows faster the longer it is left. Divide 72 by the rate, to see how fast. Time does most of the work. Waiting gives up the last doublings, the biggest ones. And costs, inflation and debt compound too, against a family.

8:21You’ll find Finna at finnafamilyoffice.com. Ready when you are.