Browse Tag: interest

Header image for making your money work harder part 2 savings bonds

Having “The Talk” About Making Your Money Work Harder: Part 2 – Savings Bonds

Welcome back to our five part series on making your money work harder! If you remember, this series is part of a BIG conversation I had with J where we talked about other ways to invest his money beyond the Bank of Mom.

In part 1, we talked about savings accounts and now here’s a recap of our conversation on savings bonds.

What Are (Savings) Bonds?

In the most simple language possible, I tried to explain that a savings bond is a loan that you make to the government. You buy the bond, and the government uses the money now. After time passes (up to 30 years), you get your money back PLUS interest.

Continue Reading

Header image for making your money work harder part 1

Having “The Talk” About Making Your Money Work Harder: Part 1

I’m really excited to start this post today! J and I had some great conversations this weekend that I will write about in a five-part series on Making Your Money Work Harder.

First, we reviewed how we’ve already started making our money work harder by saving.

If you’ve been around for awhile, you know the drill, but just in case you’re new, here’s the skinny:

  • I pay J 3% interest on the money he puts into his savings envelope every month. I give him a paper statement and email him the same statement each month (posterity!). As he records the interest in his register, we review how the month went and look at how he earned more interest than in previous months. (Read one of our recent summaries here.)
  • A few times each year, we take a trip to our local bank and deposit the money. Bank visits are a great time for conversation, and J always enjoys going because the tellers are often really nice to him. They love to see kids!
  • After that, I keep the minimum in the account to avoid a fee and transfer the rest to an online bank that pays a higher interest rate. Read all about that here.

Today we logged in to the local and online bank accounts. We reviewed the amount in each account and noted the current interest rate. The local bank account has a rate of 0.01% — yikes! The online bank account’s rate is 1.20% — not too bad (comparatively speaking).

We discussed wanting a high interest rate when you’re saving (so you earn more). And when you’re borrowing, you want the interest rate to be low (so it doesn’t cost you as much).

Just a side note, we haven’t really talked about borrowing or debt yet. I’m hoping to get the savings and growth lessons underway to have more TIME on our side. After we talk about saving and investing, start the accounts we want to start and look/talk about them monthly, we’ll move on to borrowing and debt.

I told J that there were OTHER ways of putting his money to work, ways that may pay even more. He was excited! He pulled up a chair and said, “Okay, I want to know those things.”

I’ll cover each topic in depth in the subsequent posts, but as an overview, we dived into:

Continue Reading

august-2017-interest-report

August 2017 Interest Report (and Total Savings at the Bank of Mom)

For over a year, I have been paying J interest at the Bank of Mom.

He started with $45.00 and earned $1.35 the first month. (I pay 3% monthly.)

This month, he’s up to $231.99 and earned $6.76 in interest.

I print and email him a copy of the statement each month. (He has his own email address and when I send the statement, I add other notes and tips. Hopefully he will read these someday and remember what we talked about.)

Here’s his statement for this month:

Continue Reading

National Bank of Mom The Rule of 72

The Rule of 72 and Exponential Growth

Have you heard of the Rule of 72? (It sounds boring, doesn’t it? I promise you, it’s not.)

The Rule of 72 is a quick way to determine how many years it will take for money to double with a given interest rate. Divide the interest rate into 72 and get the approximate number of years.

For example, at 8% interest, money will take about 9 years to double.

72 / 8 = 9

So let’s say that you have $100. In 9 years, you’ll have about $200.

When I was a kid, my dad would drill me on the Rule of 72 — mainly in the car on long trips. At the time, it wasn’t very interesting. So what if I’d have $200 in 9 years? (Actually, it seemed terrible. I’d have to wait 9 years to have a measly $200? Why was that worth talking about?)

The key, though, that makes this concept REALLY powerful is…

Continue Reading

How National Bank of Mom Rewards Savings

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. (Download a copy of the spreadsheet.) 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.

Continue Reading