Are You Making More Money Or Losing Money When You Save It In A Bank?12/16/2020
Making More Money Secret
The secret of making more money is contained in the word “currency.” Water flows in river currents. Money also needs to flow and circulate. Imagine you deposit $1000 in cash into the bank. Contrary to the images I had as a child, the bank does not take the cash and stash it into a vault somewhere. Instead, it keeps your deposited funds moving by loaning the money again and again. It creates profit from your funds while you earn interest.
Banks And Savings
Compare how the bank treats your deposited cash with the typical financial advice given to consumers. Financial experts advise you: “Save your money.” “Lock it up.” “Hang onto it.”
Benjamin Franklin said, “A penny saved is a penny earned.” A case can be made that Franklin had it wrong. These days, “A penny saved can be a penny lost,” because of the economic concept called, “The Time Value of Money.”
In simplest terms, this concept means that a dollar today is worth more than a dollar will be in the future, because of inflation. When you “save” your money, it stops moving – for you. The bank will pay interest on your “saved” currency, but the interest rates tend to be very low, and almost never enough to match inflation.
This means you can watch the number of dollars in your account increase all the while the value of your dollars decreases. Your “penny saved” today is not going to be worth a penny in the future.
Make More Money Difference Between Saving And Investing
If your goal is to “make more money,” it is critical to understand the difference between saving and investing.
Saving money changes its nature, because the flow has changed the essential nature of money as energy. The definition of energy is the capacity to work. As energy, money is also dynamic and has the capacity to work. When it stops moving, it stops being energy. The essential point is that “saving” turns money from energy in motion (kinetic energy) to potential energy. In contrast, “investing” puts the energy of money to work.
Making More Money By Investing
What is the practical implication of all of this about kinetic and potential energy, and “The Time Value Of Money?” In simplest terms it means that you can increase your wealth more when you put your own funds to work by making your own investments than you can by handing your funds to others. While you “save” your money in a bank, they use your money to invest. The bankers make the lion’s share of the profit and give you a tiny portion in the form of interest.