Why Put Your Money In The Bank?
It still baffles me to think that people put more money in the bank than the amount that they want to transact in a certain period.
Compounding Interest vs Inflation
Yes, the principle of compound interest is constantly preached over and over again by the education system. That even a $1000 dollar deposit can become a million if it is let to compounding effect. This definitely is true but not with the rates that are offered at the banks. At 3% interest, $1000 only doubles after 20 years. And yes by the time it doubles the inflation rate will exceed the “interest” that you would have supposedly earned.
So What Then?
So what then should I do you may ask. Well the answer to that from me is that I am not a financial advisor. Period. Well, I am not going to stop there of course. I will not tell you exactly where to put your money but I sure can tell you how to be a better financial person than hoping that the 3% per annum you earn at the bank is less than the rate of inflation.
Study What Banks Do
Did you think banks just keep your money safe and then somehow find a way to give you a 3% bonus just to award you for giving them the honor to keep your money? Well if you thought this way then I am sorry to pop your bubble and tell you it has never been like that, it is not like that, and it will never work like that. Rather banks give out loans, invest in promising stocks, trade currencies day in and out, trade gold amongst other many things they do.
What If I Cannot
Well if you cannot trade or at least follow stocks consistently then you are not exactly doomed. You can also invest in an index fund that pays way higher percentages per annum than any bank would offer you. In general, all I can say is better yourself as a financial person so that you do not have to end up looking forward to a 3% per annum from any bank.