Interest: Perfect Medicine or Poison to your Financial Health?

May 09, 2022

Author: Elle Miller

Your bank is probably lying to you. On average, normal bank deposits will PAY YOU about 1% interest per annum. What many people don’t realise is that banks really don’t pay you ANYTHING compared to the amount you’re losing each year to inflation. 

According to some: Interest is truly the eighth wonder of the world and one of the best-kept secrets the wealthy have been using to keep their status for generations. It is also the worst poison plaguing normal individuals through debt, mortgages, or even savings. 

Just like Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it”.

Okay, so how exactly does interest work? Is it medicine or poison?

To answer that, you need to first understand how banks earn with your savings. Do you have cash saved in a deposit or savings account? Yes? 

Banks take your savings and lend it to other people that need them. During the lending period, they are able to collect interest on the amount. That interest can range from 5% to 20% or even higher in some countries. This is the bank's earnings.

But if you’re a loyal saver in a bank, you’re in luck! They would be giving you about 1% bank per annum. For other banks, it is much much less. I’ve seen returns of only 0.325%! 

In today’s economy you are losing up to 9% of the value of your money each year - probably higher if you use a more realistic Consumer Price Index (CPI) measurement. Inflation is no joke and has been on the rise ever since the global pandemic. At the current rates of 8-9%, your 1,000 dollars has a lot less purchasing power as the year before. 

So, the age-old lessons of just saving your hard-earned money and sticking it to an account to keep it safe might not be the best course of action for you anymore. 

Just imagine stepping into the shoes of the banks. What if you’re the one earning 5%, 10%, 30%, or even more of what you put in?

Imagine how your hard-earned cash can grow into generational wealth over time. Imagine beating inflation. Imagine earning even when you’re sleeping. That is the magic of investing and earning compound interest. 

These days, there are SO MANY ways for you to earn that interest. From individual stocks like Amazon or Apple, index funds to have a diversified portfolio, to bonds to keep it steady and so much more. 

Here at Breakout Solutions, we explore the world of Digital Assets and how you can invest in the space to get returns far greater than what you can get elsewhere.

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