I think this is one of the most amazing stories I have heard in a long time.
Recently I wrote a post about Warren Buffett and how he planned to provide for his family after his death. This is another post in a related series about a man named Myer Kripke. His obituary was recently in The Age and was written by Douglas Martin of the New York Times.
Buffett and the Rabbi
Myer Kripke was a Rabbi and lived in the same suburb as Warren Buffett (one of the worlds richest men), was a member of the same Rotary club and they often played cards (bridge) together with their wives. As the couples became friendly in the 1960’s, Dorothy Kripke (Myer’s wife and children’s author) told him to “invest his money with his friend Warren”. They had recently inherited some money and with savings added, they had about $67,000. He eventually asked Buffett to invest their nest egg and he agreed.
By the mid 1990’s, their investment had grown to $25 million but the Kripkes still remained modest with their spending. They never moved from Omaha and still lived in their 3 bedroom $900 a month apartment. Myer Kripke still worked at his synagogue and never made more than $30,000 a year.
The Kripkes had met and married in the Jewish Theological Seminary of America in New York. It suffered a fire in 1966 and the Kripke’s pledged $15 million to the school for reconstruction after their deaths.
This just confirms what a great investor Warren Buffet is.
Let’s do the figures
Please use the calculators I’ve made available on the top menu of this blog. $25,000,000 produced, from$67,000 over 30 years = 21.825% per year. So every year he had his neighbours money Warren was averaging 21.825% return with their money. That is a reminder of what time and compounding can do to your investments.
If you use the Compound Interest calculator and input 67,000 in Amount of Money, 30 into Number of Years, and then play with the Interest Rate till you arrive at the right answer. I think 21.825%, is pretty close!
Warren started me thinking and I decided to do a spreadsheet to draw your attention to the possibilities of saving a small amount each year. I chose $5200 per year, or $100 a week which should be achievable in a two wage household. If you want to save more or less just adjust the figures accordingly.
I also used Australian Foundation Investment Company because it is one of the oldest and most trusted Unit Trusts in Australia. It doesn’t produce spectacular results but over time has steadily supplied a good return to it’s investors. The unit prices I have included are directly from the latest quotes on AFIC website. I have not included Dividends or the Dividend Reinvestment Plan which would have added to the totals.
This is not over 30 years though. I could only get information for the last 14 years and it is about 5.55% return per year (check with the Savings Calculator).
I hope this story has inspired you to start a savings program. Please leave a comment if you enjoyed this post.