How Banks Are Ripping You Off

How Banks Are Ripping You Off
Email: june@junecollier.com
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Hello, this is June Collier from Make Your Money Work For You.

In this short video, I am going to give you a quick understanding of how banks are ripping you off and why I tell people to only use banks for storing small amounts of cash for paying your bills, buying groceries and other short term money needs.

What I am about to share with you has been challenged by some people who work in the banking industry. Bank tellers and bank managers have written to me telling me how wrong I was for leading people to believe that banks are not great places to invest your money. They have stated that because they worked in the banking industry they had a better financial education on the subject than I.

What they did not know is that I use to work as an Assistant Vice President for Wachovia and Wells Fargo Bank and I promise you that just because a person works for a bank does not necessarily mean they have a good financial education and understands how money wealth principles work. What I am about to share with you was NEVER taught to me by either of the two banks I worked for.

The Rule of 72
Let’s first start off by talking about a financial formula called the Rule of 72. In it’s most basic definition, the Rule of 72 is a quick and easy formula that tells you how long it takes for money to double at whatever interest rate is earned.

So for example, if you have an investment that earns 6% per year, untouched, your money will double every 12 years. 72 divided by 6 equals 12.

Compound Interest
Albert Einstein is quoted as saying, “Compound interest is the 8th wonder of the world. He who understands it, earns it. He who doesn't, pays it.”

Compound interest is the accumulated interest from previous periods. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

Inflation
The last piece you need to understand is inflation. Inflation is the general increase or rise in prices for goods and services bought over a specific period of time. In simple terms, the cost of 1 gallon of milk in 1980 is not the same price as 1 gallon of milk today. The difference in the price is inflation. If you had the same dollar from 1980, it would have less buying power today because of inflation.

I conducted a Google search to see what the national average interest rates on bank savings accounts. The FDIC reports that it is currently .09% pays in interest to deposit your money there. That’s ninth of 1 percent. It’s not even close to being 1%.

So, now that we understand the Rule of 72. Let’s divide 72 by .09 and see what we get. We get 800 years for our money to double. That’s right… 800 years! Just so you know… .09 is high considering a major bank brand like Bank of America or Wells Fargo.

Bank of America offers a savings account that pays .03% which doubles your money every 2,400 years. Think that’s bad, Wells Fargo’s savings account pays .01% which doubles your money every 7,200 years! 7,200 years!

Now unless you are a Highlander immortal, you will NEVER see your money double in the bank. But that’s not the worst of it.

Remember inflation. The value of your dollar must keep up with inflation. If it doesn’t, then you lose on the buying power of your money.

When you look up the inflation rate, you will find that it is hovering at 2%. That means $100 dollars of groceries today will cost you $102 one year from now.

If you put your $100 in a savings account paying .09 % you will have $100.09 in one year which means you would have lost 1.91 cents in buying power.

If I had $1000 in that savings account, I would have $1000.90 at the end of my first year. The inflation value would be $1,002 which gives me a net loss of $1.10.

If I had $10,000 in that savings account, I would have $10,009 at the end of my first year. The inflation value would be $10,020 which gives me a net loss of $11.00

So, if I put my money in the bank… I am GUARANTEED to lose the spending power as long as it is being invested at rates lower than the inflation rate.

Finally, let’s see how long it takes the bank to double their money.

Bank of America offers a mortgage at 3.62% which doubles their money every 19.8 years.

Bank of America offers a car loan at 2.99% which doubles their money every 24 years.

Bank of America offers a credit card at 16.74% to 24.74 % which doubles their money every 2.9 years to 4.3 years

Do you now understand why they start jamming credit card offers in your face as soon as you turn 18 years old. You make them money.

Banks buy and sell money. They buy your money at ridiculously low rates then turn around and sell your money back to you in the form of credit cards, vehicle and home loans at much higher rates than they pay.

Видео How Banks Are Ripping You Off канала June Collier