Dude, Where's My Money?

Personal Finance

Dude, Where's My Money?

30th May 2009

So I had opened a "special" type savings account about over a year ago. I decided to go to my banker and open a savings account with a condition called a 32 day account. What is a 32 day account all about? Well in a nutshell, it's a savings account which accrues interest on the amount in the account at that time, when interest is due, and you can only withdraw money from it after you give the bank notice. The notice period is ofcourse as the name of the account suggests, 32 days. Now you might be wondering why I am telling all this?

Personal Finance If you are like me then you may or may not have planned to be out of a job amidst this financial crisis. Those with foresight were on the path of personal wealth creation which involved saving your money in one type of investment account or another at a bank. It does sound like a good idea to put your money in an interest bearing bank account.

So I thought. See when I opened my 32 day interest bearing investment account I had calculated what I should have in a year's time with the interest rate I was given by the bank at the time I opened the account obviously. What I failed to take into account is that there would be a financial collapse in our economy, rates would be cut and inflation would eat into my hard earned savings money. So all in all I actually lost, hence the heading "Dude Where's My Money?"

This doesn't mean you should go and withdraw your savings money. What this means is in future you should be aware of things like inflation. What is inflation? A simple definition from Economics.about.com states "Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole." What this means is that even at a low rate of annual inflation, the cost of goods and services usually outpaces what banks pay in interest-bearing accounts.

When you are looking to open a savings account, best shop around to compare since banks use different methods to calculate interest. Do your own calculations of how much you will earn over a period using a formula known as the APY (annual percentage yield). The APY is rate of return taking into account the effect of compounding interest. The formula is as follows:

The resultant percentage number assumes that funds will remain in the investment vehicle for a full 365 days. So be sure to ask your banker how withdrawals will affect your returns although the most obvious is bank charges. Well needless to say I've closed the account taken my money out and I'm looking at where next to put it.

"An investment in knowledge always pays the best interest. " - Benjamin Franklin

Comments (5):

Dave Says: I feel your pain. I was quite disappointed at my savings returns too | 05.30.2009 |

Tony Says: Having been laid off I had to dig into my savings and this would have helped if I had known earlier about APY | 05.30.2009 |

James Says: With the current interest rates I wouldn't bother owning a savings account | 05.30.2009 |

Collin Says: I'd have to agree with you James, doing the calculations it just doesn't make sense | 05.30.2009 |

Steve Says: Let us know what you find to put your money into that beats the savings account | 05.30.2009 |

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Dude, Where's My Money?

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