The question, then, is this : Shall he, at twenty, dependent upon his own resources, and compelled to attain to a fund that shall protect him possibly from the age of sixty, waste a dollar that has a value to his own fund of nearly five times itself? Read in these terms : every five cent piece is twenty five cents ; every dime is fifty cents; every dol lar is five dollars.
But a skillful and economic worker should, beginning at twenty, not have tinue for forty years at a level of income as instanced here. He should increase his earn ing capacity, and, consequently, his savings.
The illustration, however, is valuable in this : It shows that money is to be valued by the in dividual in terms of what he has to do to earn it. Further, it shows that taken over a con siderable period of time, money has an enor mous power to increase. This increase helps a man who works on a forty year plan, to establish a comparatively large fund from average wages. Even a man of forty-five who has never saved, but is, at last, convinced that he must do so, has a great time opportunity in a twenty year schedule. Every dollar he sets aside in the first year is worth approximately two dollars and twenty cents in the twen tieth year. This means that every wasted dime is xeally twenty-two cents; every wasted half-dollar is one dollar and ten cents.
All earnings, then, are to be separated into three funds, and the value of every dollar's worth of labor (for labor produces the dol lar) is to be determined in terms of the pur pose of the fund.
i. The fund for immediate necessities. The value of the dollar of this fund is found, first, by being sure as to what constitutes necessities—not confusing them with luxu ries; second, by taking care to get the dol lar's worth in every purchase. In a sense,
money in this fund has no future value, or only a limited amount of it.
2. The fund for savings for future pro tection. Every dollar in this fund is valu able, not only as one hundred cents, but as many more as its increment will amount to at the end of the saving period. Ten years hence the dollar of to-day is worth one dol lar and forty-eight cents; in twenty years, two dollars and nineteen cents ; in thirty years, three dollars and twenty-four cents; in forty years, four dollars and eighty cents—and so on; these amounts being at four per cent com pound interest.
3. The surplus fund. There may be now and then in hand some unexpended money after the two preceding accounts have been paid. There are several uses for this money : a. Some of it should be set aside to make up a small cash emergency fund.
b. Or, it may be added to the regular sav ings account in anticipation of a day in the future when it may be hard to keep up pay ments to this fund.
c. Or, it may be spent after the manner described in Chapter XVIII, in philanthropy.
d. Or, it may, as the phrase goes, be blown in on luxuries and amusements. If it is, every member of the family should receive an equal share in what is purchased.
e. Or, it may be sanely divided between a, b, c and d.
The surplus fund left in hand after all these obligations are met, is the one that offers the most difficulty in handling properly. But, as we have seen, it may have many possible uses.