If you’ve asked that question of your bank, you know the answer – the bank. That’s it, the bank wins. You get squat for your savings account. Virtually every investment has better returns than a savings account, from collecting comic books, to microfarms. It reminds me of the parable that Jesus told in the bible about the servants who were given a bag of gold by their master when he was going away for a while. The ‘loser’ was the one who buried the gold in the ground until the master returned. Well, today that loser would be the one who stored the gold in a savings account.
Banks take the phrase ‘low risk, low reward’ as their mantra apparently. If you have less than $100,000 in your bank account, then the amount is guaranteed by the FDIC, so in theory, you have no risk, hence the ‘no reward’. If you take inflation into account, you are actually losing money by leaving it in a savings account. When this article was written, the Bankrate.com national average was .1% APR. Not 1%, 0.1%. If you planned ahead for your retirement and think you’ve saved enough with $100,000 your interest on that money for a year, would be about $100. So, with the interest on $100,000 for an entire year, you and your spouse can go eat a nice dinner – ONCE. You may as well be burying your money in the back yard.
The Money Club Lets Everybody Benefit
With a Money Club, there is obviously more risk than a savings account at the bank. On the other hand, the risk is somewhat controllable by the members of the Money Club. Those who stand to gain the most from the Money Club, inherently take the greatest risk.
The ones who take the least risk pay the most in interest, but even they pay less in interest than they would with a credit card or personal loan.
The basic concept of the money club is that you take out the overpaid middleman – the bank. With the bank out of the way, investors can get much greater returns than can be earned from a bank, and borrowers can borrow at a better interest rate, and they can even set the rate themselves, to some extent!
In our next article, we’ll lay down the structure of the Money Club, and how to set one up.