Teaching Financial Freedom: Hint, Banks Aren’t The Only Option!
Are Banks the Only Option for Our Money?
We learn about the importance of money from a pretty young age. Whether the lessons come from our parents when we’re young (“money doesn’t grow on trees!”) or when we get old enough to make purchase decisions and realize how much money it really takes to get things we need, want, and desire. As homeschoolers, it is our responsibility to transfer this wisdom to our kids, and while “money doesn’t grow on trees” is a start, raising financially literate, faithful stewards is the goal.
When it comes to business, money plays a vital role. Without it, just like in our personal lives, we are unable to purchase things we need to move our businesses forward. The need for money can range from product inventory, office equipment, machines for manufacturing, or funds for a marketing campaign.
Most of the lessons we have been taught regarding money revolve around banks. Banks were established in this country back in 1791 and are usually housed in large, robust buildings that exude a powerful mystique about them. These institutions tend to make us feel confident that the banks will keep our money safe due to the fact they are FDIC insured, but did you know banks only have 1-2% in reserves to cover deposits? That means, if the banks really were to go under, they are roughly 98% short on covering the loss. Is it just me or could that be a problem?
We are taught that our money grows when we utilize bank products. Is that true? What is the current interest rate offered by a bank savings account these days? Somewhere under 2% as of this writing. So, with inflation being around 10% rather than the 3-4% we’re usually told, that means our money is losing between 4% and 8% of its value in this scenario – and the longer we save, the more we lose! Even the magic of compounding interest can’t beat this sad reality. That just doesn’t sound like a good idea. Well, at least we can rely on banks for loans when we need to make a large purchase or to adjust cash flow in our business. Unfortunately, that’s not a great option either as 50% of bank loan applications get denied.
Here’s the reality, once we deposit our money into a commercial bank, we no longer own that money. Wait! What? That’s right, at the moment we deposit our money into a commercial bank we become a creditor to the bank. Our deposit turns into a short-term unsecured loan to the bank. Then, because of fractional lending, every dollar deposited into a bank tends to get loaned out twelve times. What? The only logical definition for that is making money out of nothing.
Before you completely come unglued, there is another option for storing your money where none of these challenges exist. It’s an option that’s actually existed for many years, but has not been readily available. It offers control over your money, avoids market volatility, provides a financial legacy for your family and allows you to earn interest on your money while you use it.
Just like education options for our children, we are trained to think within a particular box (traditional school) and it takes a great deal of effort to see what lies outside that box (homeschool). Teaching our kids financial freedom and controlling our money falls into that same scenario. We have been trained to fully rely on the banking system to store and grow our money. Once we learn there is another way, it opens up a world of new possibilities for our families and businesses.
To learn more, contact John Robinson at Purple Monkey Garage at 704-870-7318.
Photos by Allef Vinicius and Fabian Blank at Unsplash.com