Is Your Savings Account Working For You? Upgrade Your Financial Education #1

October 28, 2023

For the super majority of us, the quality of financial education we receive is severely lacking, sometimes non-existent and very often wrong.

In many ways, the traditional banking and financial system is designed to make others, like banks, investment firms and insurance companies, wealthy instead of us the ordinary citizen.  This short series is about increasing your financial IQ and learning more about how money really works and using this knowledge to your advantage.  Let’s dive into why it’s time to Break That Bank!

Let’s say you have $75,000 in the bank.  The average savings account in America pays just one tenth of one percent in interest.  When we do the math, your $75,000 earns $75 per year or $6.25 per month.   It’s very tough to get excited about this type of return on your hard earned money.  It gets worse from here because you’ll have to pay tax on the interest earned.  Let’s even say you’re in a low tax bracket of 12%.  Again we’ll do the math and now you’re earning $66 per year or just $5.50 per month on $75,000.  Your ending balance is $75,005.50 so again, you’ve earned a whopping $5.50!

The next, and more concerning, challenge is inflation. Let’s assume a rate of 5% do the math, one month alone the buying power of your $75,000 balance has fallen by $300.  While you earned $6.25 Inflation has reduced the buying power of your savings by $300.  You are negative $293.75 in this situation.  Are you beginning to see why saving, at least in the traditional way, is a losing battle?  Adjusted for Inflation, your ending balance is now $74,705.  

Too many people believe their Savings grow or will at least maintain its value when in reality it is shrinking. This gets more upsetting after hearing what we’ll talk about next.  Loans are one of the biggest money makers for a bank.  While your savings are shrinking the bank is building serious wealth using your money.  Banks love building wealth with O.P.M. (Other People’s Money), which means your savings is their O.P.M.

For example:  Let’s say you take a $750,000 mortgage from the same bank you have $75,000 in a savings account.  It’s a 30 year loan @ 6% with a monthly payment of $4,497 per month where $747 is principal while $3,750 is interest.  The bank charged you $3,750 in interest while you earned just $6.25.  This means you’re $3,743.75 negative.  The bank is managing debt to build wealth.  Sweep Strategies can help you do the same for yourself – instead of your money enriching others.

As stated earlier, the current system is designed to grow the wealth of others “the rich get richer”.  We encourage you to empower yourself with sound financial education in order to learn more about how money really works and take steps to Break That Bank and build YOUR wealth!

To discover how our Cash Flow Coaching program can transform your financial journey, reach out to us now at (808) 533-4455 or drop us a message at Don’t wait, take the first step today!

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