Do you remember learning about the water cycle back in grade school? You remember—there is one big pool of water for everyone on Earth to use, and the water goes through various stages with some water lost or transferred as it moves.
What a lot of people don’t realize is that money is treated exactly the same way. Regardless of where it originated, all money gets circulated through the hands of individuals, banks, and corporations. However, our current banking process makes some people winners and others losers. Understanding what happens to your money as it goes through the banking process is essential if you want to stay afloat and not be taken victim by the banking process.
The banking process concept is simple, but not everyone understands the implications and consequences it has for the average family.
Here is what happens when your deposit your money at a bank:
You give your money to the bank, which holds it for you and offer a 1-2% interest rate on your savings account in exchange.
The bank, rather than keep your money safe, lends it to other individuals and groups like credit card companies and car financing businesses. These firms—funded by your money—sell this money back to people like you.
The final cherry on top: when you borrow from these firms, they place a huge mark-up on the borrowed money. It’s not unusual to see interest rates like 7%, which if you have noticed, is much higher than the 1-2% interest you are earning from the bank.
Herein lies the problem: by following the traditional banking process, you lose your funds to money lenders who were supported by your money from the beginning. This cycle is exactly the same, whenever you store your money in a money-storing institution, whether it’s a bank, insurance company, or retirement account—it is all the same story. This banking process is exactly the same all across America, and thousands of families are struggling to get ahead as a result.
The only way for you to get out of this vicious cycle is by becoming you own banker. If you don’t feel comfortable navigating the complicated waters of wealth management alone, a financial advisor can help you figure out the best way to manage your money, with your best interests in mind. With some smart private wealth management, you can escape this game banks play in which they are always the winner and you are always the loser.