Well if you all don’t know yet I work at a credit union (its like a bank) and working there I’ve grown surprised on how little people know about investing money.

Let’s say you have a savings account and you are getting 3% interest on a balance of 100 dollars. Every month you will earn interest on your balance, the interest is quoted annually so the amount of interest you earn is .03/12 = .0025, so you will earn .0025*100 = $0.25 on your investment.

Now lets say you want to know how long it will take to double your investment, there is a simple equation to calculate it. You divide 72 by the interest you are earning to figure out how many years it will take to double your investment.

So let’s say you have 100 dollars again invested at 5%. That would be 72/5 = 14.4 years for your investment to double.

You may also wonder what the purpose of investing money is and why banks encourage you to do it. Besides obviously making money for you, the bank uses money that is invested in terms deposits to lend out to other members. The bank makes more money on the interest they charge on the money loaned out than they do on how much interest they give out on the deposit and that’s one of the ways banks are profitable.

Another thing you should be careful of when you have an account at any financial institution is how many debits you are allowed from your account before you are charged for them. Many banks let you have debit cards, but most basic account packages only allow a limit of 2 debits a month before they charge you. At my credit union its $0.50 for every transaction after you go over your allowable debits – so you should check to make sure you have a chequing package that suits your needs. Also, most ATMS are not owned by the financial institution that your account is drawn on and they can charge up to 5 dollars for withdrawing money from them (most charge about 2 dollars… but it adds up quick).

The truth about banking is that financial institutions like to make money, and often make money on the ignorance of their members, so its important to be knowledgeable on how things work.

Anyways – if you have any questions about banking just ask and I’ll see if I can answer them

- Triss

thanks! I usually ask my parents but I think it's a good skill to learn..gotta flee the coop sometime

Hah ha ha, I just opened a bank account and I get 0.025% interest on it. Great percentage, huh?

I don't trust banks

Great article! (Yeah yeah, I know this is late. This is my first chance to look at it, so nah.) However, be careful you don't overstate the value of an interest rate either, as some accounts can come with extremely low savings.

For instance, banks I have dealt with before have used interest rates from .250 to .150. You may have a better deal in the states, but I've found that it's hard to generate much income through a saving's account.

Doing a simple interest calculation on $100 with .250% interest, (100 x .0025 x 1), I get a whopping...

.25$

It's always good to save when you have nothing else to spend it on, but it isn't going to generate a sizeable income either. Check your interest rates first.

And if you have enough money (usually at least $500 is needed) open an IRA: some are very short spans, but remember, you still can't touch it for that period of time - so be absolutely sure you won't need it. I recently opened one myself because the interest rates are much better.

Cool, Thanx. I did the math for my credit cards