Page 1 of Count the Cost (The Secrets of Elizabeth Bennet #2)
Longbourn
B ennet’s four-year-old daughter clambered onto the chair in front of his desk. “Papa, what are the four per cents?”
He blinked; while Elizabeth asked endless questions, he had not expected that.
“Aunt Philips was talking to Mama,” Elizabeth explained without waiting for him to ask. “She said the new owner of Haye Park was rich and lived on his four per cents.”
“I see.” Bennet steepled his fingers and gazed at his daughter. “Well, it is a little complicated, my dear. Let me call for some milk and a biscuit for you, and then I will explain.”
Half an hour later, he was open-mouthed with the depth of his daughter’s understanding.
“So, Papa. Four per cent means four for every one hundred. If I save one hundred pennies in the bank, the bank will give me four pennies every year if I do not spend the hundred pennies.” She tipped her head on one side. “Is that right?”
He nodded. “And the power of compound interest means that if you leave the four pennies saved in the bank, and do not spend them, the next year you will have one hundred and four pennies to earn the four per cent on, and then, after a very long time, you can spend the four per cent and still have enough capital left in the bank earning the money for you to spend each year.”
“Oh. I wondered how rich people in town earned their money without working.”
Bennet smiled wryly. “A lot of people have estates like we do, Lizzy. They rent out their lands to tenants. The tenants work the land, and the owner receives the rent. Owning property is like money in the bank. It is called an asset, whereas saved money is called capital.”
Elizabeth nodded, and he could see she was thinking furiously. “But, Papa, I cannot see why a bank would pay four per cent. Where do they get the money to pay it, and why do they want money that isn’t theirs?”
“Goodness, Lizzy, you are making me work hard today. Well, I will tell you this last thing, and then I will answer more questions tomorrow.” Bennet leaned forward.
“The bank accepts money from people, and when it is all gathered together and they have a great deal of it, some of it can be loaned out to people who need a lot of money to buy land, build a ship, or start a company — a business. Those borrowers have to pay interest on the money they borrow at much more than four per cent. The bank pays the savers their interest — their four per cent — and then they keep the rest which is their profit.”
Elizabeth almost fell off her chair in excitement. “So if a person like me saved enough money, they could invest it directly and make more than four per cent?”
“Yes, but it is much more risky, because the four per cents are safe, and someone’s business might not be.
” He smiled at his daughter. “When you are a little older, I will arrange for you to talk to your Uncle Gardiner. He is a very good businessman and has made a lot of money already. Some of his business makes ten per cent. Can you tell me what that means?”
Up in the nursery, Elizabeth clutched the precious little notebook to her.
Papa had shown her the estate books — great printed books he called ledgers.
He had helped her draw lines to make columns in a new notebook he had given her.
Now Elizabeth could keep a record of all the money she managed to save from her pin money.
Because they were so young, she and Jane received only a penny a week each and were allowed to buy the occasional sweetmeat or a pretty ribbon if they saw one.
Little Mary and baby Kitty didn’t get a penny yet; Mama said they were too little.
Elizabeth was quite decided. She didn’t need sweets, and she would save more than she spent and see what happened.
Papa had said that pennies were not enough for a bank to take, but he had got a small box down from the shelf for her to put her pennies, halfpennies and farthings into, and said he would add a note every month for the interest she earned; if she could prove in her notebook that she had saved it, and then he would change the note for a real coin when she had earned enough.
Elizabeth looked at what she had written down in Papa’s study. One hundred pennies was eight shillings and fourpence. It seemed an enormous amount to her, but every year she got fifty-two pennies, which was four shillings and fourpence.
She sat on the edge of her little bed. A year was a very long time. But Papa had said Uncle Gardiner was a good businessman. It meant he would not spend a long time waiting for more pennies.
She would think of something.