Skip to main content

Why putting your money in a savings accounts is a bad idea

Teaching your child to save money by putting it in a savings account is worse than ........ I can't think of anything worse at the moment. Here are the reasons that I think it is a really bad idea. You are teaching your child exactly what big corporations want you to tell your child. Big corporations need your cheap money! They make millions out of your (and millions of others like you) monthly deposits.

The reason that they can make so much out of your false perceptions is that you don't know a simple financial or mathematical calculation. Don't get scared, there will be no grade 10 maths applied here.

Ok, let me explain how it works;

Large corporations (the banks etc) promises you a certain amount of interest on your deposit(s), let's say 5%.  So on $1000.00 you will have $1050 at the end of the year, because interest is accrued and calculated on a yearly basis. Seriously, $50 a year profit with $1000?

Now, here is something that you can calculate yourself, for each deposit you make, what is the transaction fee? You have to deducted that from your interest as well.  So the more deposits you make the more banking fee's you will pay and the less you will make at the end of the year!!!!

It does not stop there, sorry.  There is another thing that you have to take into consideration. Inflation rate. The inflation rate is never really advertised on consumer level since that is a bad thing concerning savings and pensions fund payouts.
NOTE: Savings interest can never be more than inflation rate!

That leaves a bit of a conundrum does it not.  You earn 5% interest per year but the inflation rate is at least 8%.

Inflation rate is the rate at which your money loses value in one year. So, you earn 5% per year but in reality you also lose 8% per year, that does not take into consideration of the banking fee's that were deducted!!!  Your nett loss at the end of the year is more than 3% !!! You end up with $970.00!!! In effect, you are paying the bank each year to make money. It is sick, do you understand it now.

To bring profit or ROI (return on investment) into perspective. Large corporations promise you a ROI of 5% on your investment. Now here is the secret, do you know that many retail companies have a nett ROI of at least 20% (after TAX and depreciation, which is basically inflation). So you can see that you should at least earn 3 x 5% to increase your investment over time.

But this is not all.

Banks take your money and they trade with it on the Forex markets. This is the scary part. Since the banks manipulate the Forex markets, their profits are huge. Ok, losses can also be significant, but at the end of the day they make more than just 5%, they make at least 1% per day!

Banks make up to 1% profit per day on Forex trading with your savings money
So the next time you want to fund banks, open up a savings account. But just remember, there are many other ways to keep you money safe and let it grow.


Popular posts from this blog

Merrell hiking shoes showing cracks in quality

I have been a supporter of Merrell shoes for quite a long time, actually about 10 years. Their comfort was amazing as well as build quality. My first pair was hiking boots and I wore them until they fell apart, I must admit that the sole wore through before the top started coming apart.  I then bought hiking or trail shoes. I think the style was Merrell Vibram, not sure but that was written on the side of the hiking shoe.  Anyway, who cares, I don't hike or go on trails.  They are mainly used in and around at home. I also don't do any gardening with them by the way.

So all in all I don't have a lot of wear and tear as can be seen on the amount of rubber left on the new pair of Merrell Hiking shoes.

What really disturbed me is how badly the new Merrell Hiking shoes are put together. Put it this way, my old Merrell's had 5 years of walking on them, and there is not much wrong with them other than the backend plastic started to crack. Also my laces are worn out which can…

2008 Toyota Hilux Single Cab SRX D-4D with canopy - immaculate condition

I'm selling my 2008 Toyota Hilux Single Cab SRX D-4D Diesel SOLD for R 140,000.00Comes with canopyLicensed until August 2018±128,000 km still in daily use (±20km/day)Single ownerNever done hard commercial workComes with full service history from Toyota Dealer.Road worthy test included and have certificate.Small dent on left side above wheel (no need to fix) Please contact during office hours only. I prefer correspondence via email at first.

Mercedes Benz W203 2001-2007 worst merc to buy ever

Let me defend myself first. I am a merc fan. If I thought it was an investment I would buy a new one, but it happens that I know a little more about money since school days and realized that a new car is a waste of money.

I started looking for a good second hand car
This had led me on the adventure of looking for a good second hand car that is comfortable and reliable. Another important factor is fuel consumption. It must be low since I am in no mood forking out half my salary in fuel costs.

The C-Class size fits my requirements perfectly so I started looking at various models and technical specifications. I was quite baffled at the amount of information that is available on mercs compared to other vehicles which is great if you are planning to buy a second hand car and do some of the maintenance yourself.

I think the best source of Mercedes videos and information is I think Kent is very realistic and has enormous knowledge of these vehicles and its worth…