By this time, you already know that we subscribe to a three-envelope system (complete with registers) for savings, spending and giving. At times, we also use an additional envelope for short-term savings — when J is saving for a larger purchase a few months in advance.
The first stop in our banking process (and the reason for the name of this blog) centers around the savings envelope.
Every month on the 9th, I pay interest on the total in J’s savings envelope. To make it enough that he can see a tangible result (and earn more than the few cents he would at a bank), I pay 3% monthly.
I create a bank statement, give him a printout and also email him a copy. He writes the interest amount in his savings register to balance the account.
I developed a spreadsheet to calculate the amount and format a nice-looking statement for him. You can download it here! Fill in the sections in blue on the first sheet. Each month, enter the deposits made in the appropriate section, and the interest and totals will recalculate. Print a copy or save as a PDF and email away.
What is interest?
When borrowing money, interest is the money that you pay on top of what you borrow. Borrow money, pay it back AND extra.
When saving money, interest is the money that you earn. The bank “borrows” money from you and gives you a percentage of that money (for the privilege of using it). Put money in and get that amount back PLUS more.