Keeping Money in Your Bank Only Will Keep You Poor

The Purpose of Banks

It is important to have a secure place to store your hard-earned money. After all, carrying physical cash or hoarding money under your mattress are both ineffective ways to store money. Banks provide a safe destination for people to store their cash. Also, banks provide other services to their customers such as checking and savings accounts. However, most people fail to realize that banks are in the business of making money and are not necessarily looking out for their customers’ best interest. This article will attempt to increase your understanding on why keeping money in your bank only is not in your best interest.

What Do Banks Do With Your Money?

When you deposit money into your checking or savings account, you are essentially lending money to your bank at a very low interest rate. In return, banks lend your money to other customers at a higher interest rate than what they pay you monthly. In other words, banks take your money that you deposit and invest it. Some of the loans banks provide are mortgages, personal loans, business loans, and credit card offers. It is important to understand that banks make money in a variety of ways and are not just limited to making money simply by making loans. For instance, banks make money off charging their customers fees such as late payment fees, ATM fees, and overdraft fees.

How to Put Your Money to Work?

In conclusion, banks provide a safe and secure place for people to store their cash. However, keeping money in your bank only will hinder your ability to build wealth. Consider investing a portion of your money into financial assets such as stocks, exchange traded funds, or index funds—all these assets have the capability to appreciate over time and may generate dividends.