Cash investors can put their money in U.S. Treasuries or passbook savings accounts to earn less than 1 percent annually. Another alternative is to open a CD with a cash-poor bank, and log returns in excess of 3.5 percent.
The only reason that Rod Tidwell stuck with his agent in Jerry Maguire was because Jerry promised to show him the money. The same dynamic is happening right now in the banking industry, as troubled banks are promising fat yields to keep their old customers and attract new ones.
The run on cash in this country is creating opportunity for depositors, even as it continues to cause problems for financial institutions. Banks are eager to build up their cash reserves, but a credit freeze and rising loan defaults are sending them two steps back for every one step forward. The cash need is particularly dire for institutions that have less-than-conservative capital structures. You can call them troubled banks, bad apples, or just unlucky. Whatever the case, they need cash and lots of it.
If there were no credit or mortgage lending crisis, these banks would replenish their cash by borrowing from other banks, and by receiving scheduled loan repayments. The banks that make mortgage loans for resale would also have a regular supply of liquidity from mortgage investors. Unfortunately, none of these sources are reliable right now. That’s why banks are stumbling over each other to get to the money that’s in your wallet. read more
Teens & Money: Checking & Savings Accounts
In this day and age, parents have left most of the child education responsibilities to schools and teachers. However, one subject remains untouched. Financial know-how is not taught in schools, thus when kids grow up and go to college they end up living in debt. Parents may have taught their kids how to spend wisely when shopping or even how to save cash on a piggy bank when they were small kids. Now that the kids are all grown and are now teenagers, the information should be upgraded to new ways of making money and managing it. This is where the idea of teaching your teenage kids about checking and savings accounts comes in.
Parents should first of all sit down with their kids and give them detailed information about a savings account. They should be made to understand that a savings account is one that does not have a debit card or check attached to it. As a result spending money from a savings account is rather difficult. Teens should be taught that when it comes to looking for the most ideal savings account, interest rates are the determining factor. This means that as the money is saved on the account, it tends to accumulate interest based on the percentage agreed upon on opening the account. This policy works in such a way that the more money that is saved, the greater the level of interest accumulated at the end of the day. full article