MONEY: Master the Game

How hard is your money working for you? If you're like most people, your money probably hasn't been exercising at all. It's been sitting lazily in your bank account, growing only minutely – if at all.

This needs to change. We need to make our money work hard, especially as we won't be able to rely on traditional saving methods in the future.

You may imagine that growing your money is difficult. Maybe you're happy with your income, even if it's not enough to cover your retirement, because you assume you can rely on a pension or retirement fund to help you out.

Unfortunately, this isn't true. Many of the world's retirement systems are failing. In the United States, a 401k retirement plan was originally invented to supplement income in old age, but for many, it's the only thing they have to rely on.

Other pension plans were hit hard by the 2008 financial crisis, and those who paid into them lost a great deal.

You can avoid this if you let your money work for you, by compounding.

Compounding means letting your money develop year after year, by allowing interest to build up. Say you invest $100, and this generates a 10 percent profit. If you leave the investment untouched, you'll generate another 10 percent on $110 the year after, then on $121 the following year, and so on.

When Benjamin Franklin died in 1790, he left $1,000 to the cities of Boston and Philadelphia. He stipulated that it had to be invested and not touched for 100 years.

After that time passed, half a million was drawn from the account, and the rest was left untouched for another 100 years. By that time, the original sum had transformed into $6.5 million.