Word of the Day: Tontine
Thursday, January 30, 2020
Word of the Day from Merriam Webster Dictionary, Jan 17, 2020
a joint financial arrangement whereby the participants usually contribute equally to a prize that is awarded entirely to the participant who survives all the others
DID YOU KNOW?
Tontines were named after their creator, a Neapolitan banker named Lorenzo Tonti. In 1653, Tonti convinced investors to buy shares in a fund he had created. Each year, the investors earned dividends, and when one of them died, their share of the profits was redistributed among the survivors. When the last investor died, the capital reverted to the state. Louis XIV of France used tontines to save his ailing treasury and to fund municipal projects, and private tontines (where the last surviving investor—and subsequently their heirs—got the cash instead of the state) became popular throughout Europe and the U.S. Eventually, though, tontines were banned; there was just too much temptation for unscrupulous investors to bump off their fellow subscribers.