When you deposit money into the bank, it doesn’t stay there. Banks use your money to make more money for themselves. Here’s how it works:-
When you deposit money into a bank, it becomes a liability on the bank’s balance sheet. But they don’t want your money just sitting in your savings. They want to use it to make more money. So they loan your money out and collect interest.
Deposits = Liabilities
Loans = Assets
This is called fractional reserve banking.
Legally, the bank only needs to keep a fraction of customer deposited money on hand in reserves. The rest they’re free to loan out or invest as they see fit. Banks make billions of dollars a year from this system.
They might be loaning your deposited money out to someone else with a 7% interest rate. But then they only give you a measly .05% interest on your deposit.
This is why the only money you need to keep in your bank accounts is the money you need to pay your bills for that month.
Also, have my emergency fund of 6 months expenses in an MMF
The rest of the cash should always be invested so it can generate a return for you.
Prefer to have your money working hard for YOU, not the bank.
School didn’t teach you this stuff, but I will! 👽
https://t.me/buildbackbetternow
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