The Importance of Saving
6 January 2007I was reading the AARP Bulletin today and in the back they have a ditty on “The Power of 50″, as in the power of a $50 dollar bill and how time erodes its value through inflation if not put someplace where it can grow.
They say a 1957 $50 dollar bill is worth $6.58 today after inflation. To me it feels like even less. Now I don’t want to date myself but in 1969 a gallon of gas was $0.25 (during a gas war) and a pack of smokes was $0.25. Yep, a carton of cigarettes cost $2.50. Today a gallon of gas is going for $2.55 a gallon (reg unleaded in WA) and a pack of smokes is about $4.50 or so (I don’t smoke, so am guesstimating). I am sure there is lot more tax built into both items.
In their piece they use these price comparisons.
- Gas, a gallon - $0.23 in 1957, $2.24 now
- Coffee, a pound - $0.69 in 1957, $3.14 now
- Milk, a gallon - $0.97 in 1957, $3.20 now
- Eggs, a dozen - $0.45 in 1957, $1.26 now
- Sugar, a pound - $.11 in 1957, $0.51 now
- Harvard tuition - $800 in 1957, $31,665 now
- New home - $14,200 in 1957, $241,400 now
- Median income - $4,966 in 1957, $46,326 now
Note - That egg rancher isn’t doing very well, is he?
Then they finish the article by showing what you would have if you had invested that $50 back in 1957.
- $50, in a savings account - Nets $284 in 2007
- $50 into the Dow Jones Industrials - Nets $1952 in 2007
So you wonder what does this mean to me? Well definitely put more of your savings into stocks than a savings account. But even more so it says to save more now and don’t wait until its too late to “let time work for you”.
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