Savings Account Rate

There is a very good CD out that is titled “The Richest Man in Babylon”. It is a narrated story, a parable of ancient times and a very wise and very rich man. His advice was sought by all those who had known him all his life. They were amazed at his prosperity and the way in which his money grew. He explained to them that the few coins they earn as they go through life, with some of them set aside as savings, will soon grow into an army of servants which will make them even more coins. This is how wealth is realized, he told them. If you eat your servants, your coins, then how will they grow more for you? They will not be able to produce any children or children’s children. This story underscores the importance of savings.

For many years now, reports have stated that Americans do not save enough. As the rates of interest on credit cards sky-rocketed to over twenty percent, the rates of interest on passbook savings accounts at most banks remained at under three percent. The return on investment of the stock market for many years has been an average of seven to eight percent on annualized average. The growth in value of real estate has, but for the past several years, been at least ten percent per year for several decades. Looking at these differences, then, is it any wonder that Americans do not bother to save money in ordinary savings accounts? If the nation is to be serious about encouraging savings as the path to prosperity in a conservative sense, then it must increase the passbook savings interest rate.

Granted that even at the low passbook savings rate, it is better to save at a low rate than not to save at all, for the few dollars saved on a consistent basis will grow to be many. Then the many can be invested in instruments and properties that yield a meatier return. People in the lower income levels can do at least something to begin the long steady climb to money accumulation with savings despite the low interest rates paid, because they are preserving their dollars and not spending them on things that will yield nothing but wasted time. It is not the interest rate alone that is the magic in saving, it is the saving itself. Two dollars put aside with two more soon after becomes four, then becomes eight, then sixteen, etcetera, until the amount begins to be more impressive.

The key then to savings is not to lament the low rate, though it is out of balance with other rates, but to save anyway in order to have some funds to gather higher returns later. Started at an early age, dollars conserved begin to stack up. As this happens, the saver can learn by reading and listening to those who know how to make money grow. The saver can educate himself about the power of wealth conserved, and how to take a pocket of money and put it into ever higher growth paths. There is power in a clever and yet simple chart called the Doubling Phenomenon. This chart takes the premise that beginning with one dollar and doubling your money each step for thirty steps (or thirty days or thirty months, etc.) will result in millions. Savings rates add a little something to help that process or goal along, and getting even two percent is a bit of help. By the eleventh step, the amount will be $1424; by the fifteenth step, $22,754; and by the twenty first step, $1,458,176. The doubling is fairly easy up to the twelfth or thirteenth step, with each being possible to accomplish in just days. As the amounts grow, it takes more time and thought to reach each subsequent step. But reach it you will if you just continue, with the commitment not to expend the funds of this growing pot of gold.

So, take your few dollars to the bank and open that savings account, at whatever interest rate is current. Who knows? The federal government might just decide to give Americans a real incentive to save by increasing savings account rates at all banks.