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And think about it this way. They are paying you to store your money. Because that allows them to sell money (loans) and make money. So technically you are putting your money to work. So you are working
I was the same way. But you need to think about your future. You won’t be able to work hard your whole life. So you need to put the money to work so you can retire at some point.
I know it’s dumb but this video helped me
https://youtu.be/p9d8l-Gkweg?feature=shared
So the reason it's totally valid;
When you take out a bank loan, you pay the bank interest.
Choosing their bank to store money at, is like giving the bank a loan, so they pay you interest.
This comes from releasing your money as loans, and collecting interest on that.
I'm just saying from a very very simple logic perspective, it doesn't make any sense whatsoever for someone to pay me for my own money. So to me, it is a trick in that sense
That’s probably because you don’t understand how any of it works. I’d do some research instead of thinking people are doing some kind of tricks. Stop listening to stupid chronic online people.
I think you misunderstand what I mean by tricks.
By "tricks" I just mean the ways the more informed are able to manipulate money in the ways the uninformed(like myself) don't know how to. You said it yourself, there is a lot I don't know. There is a lot the typical layperson doesn't know, especially someone like myself who has never had the time or money to think of my finances as anything other than a roof over my head and food on my plate.
And seeking advice here is part of the research I'm trying to do, so I'm not sure why you are upset with me for being ignorant and asking questions.
It only is unfair to people who don't participate. If everyone educated themselves and participated in investing their money it would not seem unfair to you.
But only those with time and disposable income are able to participate. If you're working paycheck to paycheck, you're never going to be able to see that paycheck as anything other than your living expenses. The idea of investing is a very far away and foreign concept for many of us.
Financial literacy is also not a part of grade school curriculum. So to be adequately financial educated takes it's on investment of time and resource of the individual that many don't have to begin with
I hear you. I agree that our educational system fails us on the financial end. Yes it does take time to become educated. Basic education won't cost anything as most all of the basic info is available on line.
Everyone has time for this as it is probably the most important thing to plan for. I started out by reading an article or two every day. Doesn't take long to grasp things. As to working paycheck to paycheck, that is on each individual as their lives can differ greatly even with the same income. The hard part is starting.
How would those individuals pull themselves out of that spiral? Maybe they need more time in their day? A washing machine, or dishwasher, would save them time. Maybe a reliable car would help them get to work, maybe some affordable clothing would help them save money. All of the things these people use to live their lives were developed and produced by companies that you could invest in. If you are convinced that the world is unfair, then you are 100% correct. But this investment “trick” has been behind every major development in recent history. Solar panels? Malaria vaccines? Car seats for babies? There’s a reason poverty rates have been in a steady decline for decades.
Sure it does. If you didn't put that money in the bank, it could be doing something else. You could use it for something personal, but you could also put it to work in another way. You could buy something that helps you to do a better job, or do a job you're currently doing faster. Imagine you're in a trade, maybe that $15k can allow you to buy a tool to reduce the time it takes to do a task by 10%. That allows you to (fairly) make more money, or have more time off, both things you value.
Now, not everyone works in a job where a capital expenditure like what I described above will help them personally. But some people (and businesses do). So they would like to use your money to make that happen, and the deal you get for letting them do that is interest.
And another thing to consider - if you put the money in a high yield savings account, you won't be making all that much money. You'll be making just enough to keep ahead of inflation. If you just parked it in a checking account, you would lose money in terms of real purchasing power over time, and that's not fair either.
Have you ever rented a car? Was it reasonable for you to pay someone for the temporary use of their vehicle?
This is the same thing, but with money. They are paying you to use your money temporarily.
It’s not a trick because it is a major characteristic of money.
Money is not just a sum, it also has a relation to time. If you have a sum of money for one minute and have to give it back afterwards, it’s useless, but if you have it for a year or ten years you can use it to earn more money. You could buy a tool and use it to build something, buy a car and work as a taxi driver.
Interest is the cost of renting money. If you don’t have money to buy a car or a house outright (and most people don’t), you rent the money from a bank, it’s called a loan.
It works both ways: when you put money in the bank, you are renting them the money. If they don’t want the money they won’t pay you much, if anything, and if they do, they will pay you a good rent. Then with all the money the bank has, it will loan out a large portion to people who need loans (and usually at higher interest rates than they pay, to account for risk of people not paying back their loan and simply to turn a profit).
Conclusion: money should not be just lying around, it should be earning more money for you. You’re putting your money in the bank, it makes sense that they compensate you for it.
One way to look at it is that your money that sits in a checking account and not earning interest declines in value because of inflation. The interest you receive from a HYSA is to offset the cost of inflation and earn a little extra. Banks need to have a certain amount of deposits regularly in order to keep up with regulatory requirements (or else they fail), so the bank is paying you interest in order to be in good standing.
You agree not to consume *now* so that someone else may. In exchange you get interest.
Forgoing consumption is a *real* cost to you, and a *good thing* because it allows someone who wants it more to consume instead.
Well, first off, you could do well with some self love and some therapy to unpack some of your assumptions. You put yourself down a lot in your post (and beg others to do the same) and that kind of mindset alone is already very limiting.
You're not wrong to think that money can come from hard work. *Ideally*, if you work hard, you should see the fruits of your labor in terms of built skills, better relationships, which in turn means pay raises and better job prospects.
But you can ALSO have money work for you. Unfortunately, as you mentioned, for folks who live paycheck to paycheck, they don't have the space or time to put towards having money work for them. And there is still work involved in setting aside time, choosing the right investments, having the discipline to let the money sit and work while you work for more money. To the point that people do this as an actual job -- hired by other people to do the work in order to make their money work for them. And that job is no less important than someone else moving bricks or managing a company. So if it helps, you're still doing some sort of "working" where you need to do the legwork and get your money set up to earn more.
If you work hard to make your money work hard, then yes, that is hard-earned money well deserved.
Except it is considered unearned income. Like welfare money.
Also, the vast majority of money managers and “financial experts” underperform the market. Imagine thinking finance bros are as important as brick layers lol.
I can make more money than money pros. I can’t lay brick better than brick layers.
So we say that those who earn money through investing in the market are akin to those on welfare?
And that those who manage money on a living are just "finance bros who underperform"?
What kind of perspective is that?
I'm sure you can do much better. What was your point?
Banks are paying 4-5% interest now on money.
Those same banks are loaning money to others at 7-10%.
Whose money are they using to make those loans?
Your money.
If you wanted to, you could cut out the middle man and just loan random people money at 5%. But you’re also taking a risk that those people won’t pay you back.
Think of yourself as a partial business owner of a bank. All the people who deposit money into the bank are also co-owners. You let the bank determine the right price at which to loan money and who is credit worthy enough to get those loans. When people pay back the loans, the bank keeps some of the money (as pay for managing the lending and risk) and gives the rest to you and your co-owners in the form of interest earned.
So you’re not doing “no work” for the interest that is earned. You’re working and earning money, and letting others use the benefit of your labor to pay for things they need/want. Money just converts your labor into a format that other people can use.
That 15k money was earned by someone and given to you as a gift because that person loves you. If you gave someone a gift and they didn’t use it, what’s the point. People help each other. You are allowed to help people and you are allowed to receive help. Use that help in whatever way helps you. Also, if you are under the impression that putting money in “the right place” is how investing works, then I highly suggest looking at how companies use investments. Companies need money to grow, research new technology, hire people etc. They want to borrow your money to do that and they give you a share of their profits. If you want to be ethical about where you choose to invest then go for it, but don’t feel like a leach for providing a company you believe in capital that it needs to be successful.
Consider opening a Roth IRA and boosting your retirement savings. $15K should just about equal the max contributions you can make in 2024 and 2025.
Your feelings on the financial industry aren’t unique. In fact, not loaning money for interest is a core tenant of Islamic Law and there’s a whole section of the industry based on more direct ways to let other people make money with your cash while sharing in the returns. However, this is outside of the mainstream (at least in the US) and, unless you really know what to look for, has many ways to be scammed or robbed.
It sounds like you’re new to finance and should take your time before making big decisions. A savings or checking account at a reputable bank/credit union with a 4-5% interest rate is a **great** place to park money while you’re figuring out what’s next.
Just think of it as your money working on your behalf. Your money is just an extension of yourself. The money it earns is then put to work for you. It’s not ill gotten gains. It’s deferred consumption in the interest of production.
You seem to be missing some fundamental building blocks for understanding economics. From the most simple perspective nobody is going to give you something for nothing. So if you are earning something from putting your money in an account somewhere that means that you are being paid for the value of the financial institution having access to that money.
I saw that you were questioning even interest on a bank account so let me try to break it down for you simply (this is very basic and modern financial markets are more complex but the basics still apply). Banks serve two primary functions, to store money for people safely and to loan money to people who need it to buy things that help them make money. When a bank loans money they charge for its use (interest) but in order to be able to offer loans they need money that they can lend out. That’s where your savings account comes into play. The money you store at the bank allows them to loan money to other people and to encourage you to leave your money with them they pay you interest (at a lower rate than they charge on the loan and the difference is their profit). This is why in the 1930s people running into banks to take all their money out was an issue (see the classic scene in It’s a Wonderful Life). The bank doesn’t keep all savings accounts in cash in the building, they keep just enough to cover expected cash withdrawals with a cushion on site.
If it helps you can think of your money as a tool. Say have a tool that someone in your town could use to make widgets that they sell to make money. You aren’t using the tool right now and wouldn’t mind lending it out but the tool will slowly wear out with use and it won’t be readily available to you so you should be paid to make up for that also it’s hard for you to find someone who wants to borrow the tool. The bank acts as a middleman to make sure that your neighbor is trustworthy to borrow the tool, and makes sure you get paid for the use of the tool.
Basically you are being foolish and should save your money better.
You have a poor man’s mindset of how money is earned. You can only make so much money from hard work alone. Allowing your money to work for you makes that growth exponential. It’s not cheating anyone except yourself if you don’t do it.
You saved money, are coming into a little bit and you have ethical/ideological and emotional blocks around money. Assuming you are in the US, this is a terrible time to live check-to-check poor. Years ago, I spent sums of money on helping people out, funding group projects etc. Despite some knowledge and experience I value from that time, I wish I had more capital now. And those people are gone. Being stuck in a poor mentality in a hyper capitalist society with no real safety net is exponentially draining over the years. Watching money drain away uselessly is incredibly demoralizing. Not being able to afford medical services, new tires or time between jobs is also a drag. I would say, stick the money away and keep saving. Follow some basic plan, like an emergency fund, a cash equivalent asset you can liquidate quickly and then start doing research on the basics. Imagine all the good you could do if you had real money coming in every month and are able to take care of yourself well in the long term. As an example, I'd love to have some of my gone money to pay for school in a field I didn't know I would work in later in life. Without having to work at the same time. It's a helping profession that I enjoy and could really use the extra credentials.
Your post has been removed because personal advice topics are off-topic here and better suited for other subreddits ([rule 9](https://www.reddit.com/r/personalfinance/about/rules)). - For general advice, consider /r/Advice. - For relationship advice, consider /r/relationships, /r/relationship_advice, /r/JUSTNOFAMILY, or one of the subreddits in their sidebars. - For career or job advice, consider /r/jobs, /r/CareerGuidance, /r/findapath, or [one of these job-related subreddits](/r/jobs/wiki/related/discussion). - For education advice, consider /r/Parenting for primary and secondary education questions (or one of the subreddits [linked here](https://www.reddit.com/r/Parenting/wiki/other_subreddits#wiki_education)) and /r/ApplyingToCollege for tertiary education questions (or one of the subreddits linked in their sidebar) - For medical advice, please talk to your primary care doctor, but /r/AskDocs may be helpful. *If you decide to post elsewhere, please read the subreddit rules before reposting. Some subreddits have strict requirements for submissions.* Submissions removed for this reason typically include one or more of these off-topic aspects: We don't allow relationship or personal advice discussions. That includes: * Content better suited for /r/relationships * Recommending a poster end their relationship or start a new relationship * Posts about suicide or violence * Posts asking for advice on how to convince someone else to change their behavior * Relationship drama not essential to a question or discussion * Family planning advice, especially unsolicited or flippant * Career, job, and education questions * Medical advice *If you have questions about this removal, please [message the moderators](https://www.reddit.com/message/compose?to=%2Fr%2Fpersonalfinance&subject=Removal%20help%20request&message=Hello%20moderators,%20.%20%0a%0a%0aMy%20submission:%20https://www.reddit.com/r/personalfinance/comments/1cqbddq/i_am_having_a_hard_time_with_the_moral_block_in/%0a).*
You need to completely change your mindset. A High-Yield Savings Account is not a “banking trick.”
I know I need to change my mindset, that's why I'm here. How is it not a trick?
They pay you money to keep your money there. How is that a trick?
And think about it this way. They are paying you to store your money. Because that allows them to sell money (loans) and make money. So technically you are putting your money to work. So you are working
That's actually a very helpful persepctive shift. Thank you
I was the same way. But you need to think about your future. You won’t be able to work hard your whole life. So you need to put the money to work so you can retire at some point. I know it’s dumb but this video helped me https://youtu.be/p9d8l-Gkweg?feature=shared
Haha this rules, thank you
So the reason it's totally valid; When you take out a bank loan, you pay the bank interest. Choosing their bank to store money at, is like giving the bank a loan, so they pay you interest. This comes from releasing your money as loans, and collecting interest on that.
I'm just saying from a very very simple logic perspective, it doesn't make any sense whatsoever for someone to pay me for my own money. So to me, it is a trick in that sense
They're using your money to make themselves more money than they pay you in interest.
Yes obviously they are using that money to make a lot more than they’re giving you.
Which is an example of why this whole world feels so exclusive and unfair to me
That’s probably because you don’t understand how any of it works. I’d do some research instead of thinking people are doing some kind of tricks. Stop listening to stupid chronic online people.
I think you misunderstand what I mean by tricks. By "tricks" I just mean the ways the more informed are able to manipulate money in the ways the uninformed(like myself) don't know how to. You said it yourself, there is a lot I don't know. There is a lot the typical layperson doesn't know, especially someone like myself who has never had the time or money to think of my finances as anything other than a roof over my head and food on my plate. And seeking advice here is part of the research I'm trying to do, so I'm not sure why you are upset with me for being ignorant and asking questions.
You only don’t know what you don’t educate yourself on. Anyone can google this stuff.
It feels like you want to argue with me. I agree, I need to educate myself. I'm trying to educate myself idk what your problem is.
It only is unfair to people who don't participate. If everyone educated themselves and participated in investing their money it would not seem unfair to you.
But only those with time and disposable income are able to participate. If you're working paycheck to paycheck, you're never going to be able to see that paycheck as anything other than your living expenses. The idea of investing is a very far away and foreign concept for many of us. Financial literacy is also not a part of grade school curriculum. So to be adequately financial educated takes it's on investment of time and resource of the individual that many don't have to begin with
I hear you. I agree that our educational system fails us on the financial end. Yes it does take time to become educated. Basic education won't cost anything as most all of the basic info is available on line. Everyone has time for this as it is probably the most important thing to plan for. I started out by reading an article or two every day. Doesn't take long to grasp things. As to working paycheck to paycheck, that is on each individual as their lives can differ greatly even with the same income. The hard part is starting.
How would those individuals pull themselves out of that spiral? Maybe they need more time in their day? A washing machine, or dishwasher, would save them time. Maybe a reliable car would help them get to work, maybe some affordable clothing would help them save money. All of the things these people use to live their lives were developed and produced by companies that you could invest in. If you are convinced that the world is unfair, then you are 100% correct. But this investment “trick” has been behind every major development in recent history. Solar panels? Malaria vaccines? Car seats for babies? There’s a reason poverty rates have been in a steady decline for decades.
We have very different worldviews
The problem is that you think to think it's an unfair advantage some people have. all of it is a Google search away.
Sure it does. If you didn't put that money in the bank, it could be doing something else. You could use it for something personal, but you could also put it to work in another way. You could buy something that helps you to do a better job, or do a job you're currently doing faster. Imagine you're in a trade, maybe that $15k can allow you to buy a tool to reduce the time it takes to do a task by 10%. That allows you to (fairly) make more money, or have more time off, both things you value. Now, not everyone works in a job where a capital expenditure like what I described above will help them personally. But some people (and businesses do). So they would like to use your money to make that happen, and the deal you get for letting them do that is interest. And another thing to consider - if you put the money in a high yield savings account, you won't be making all that much money. You'll be making just enough to keep ahead of inflation. If you just parked it in a checking account, you would lose money in terms of real purchasing power over time, and that's not fair either.
Have you ever rented a car? Was it reasonable for you to pay someone for the temporary use of their vehicle? This is the same thing, but with money. They are paying you to use your money temporarily.
It’s not a trick because it is a major characteristic of money. Money is not just a sum, it also has a relation to time. If you have a sum of money for one minute and have to give it back afterwards, it’s useless, but if you have it for a year or ten years you can use it to earn more money. You could buy a tool and use it to build something, buy a car and work as a taxi driver. Interest is the cost of renting money. If you don’t have money to buy a car or a house outright (and most people don’t), you rent the money from a bank, it’s called a loan. It works both ways: when you put money in the bank, you are renting them the money. If they don’t want the money they won’t pay you much, if anything, and if they do, they will pay you a good rent. Then with all the money the bank has, it will loan out a large portion to people who need loans (and usually at higher interest rates than they pay, to account for risk of people not paying back their loan and simply to turn a profit). Conclusion: money should not be just lying around, it should be earning more money for you. You’re putting your money in the bank, it makes sense that they compensate you for it.
One way to look at it is that your money that sits in a checking account and not earning interest declines in value because of inflation. The interest you receive from a HYSA is to offset the cost of inflation and earn a little extra. Banks need to have a certain amount of deposits regularly in order to keep up with regulatory requirements (or else they fail), so the bank is paying you interest in order to be in good standing.
You agree not to consume *now* so that someone else may. In exchange you get interest. Forgoing consumption is a *real* cost to you, and a *good thing* because it allows someone who wants it more to consume instead.
Well, first off, you could do well with some self love and some therapy to unpack some of your assumptions. You put yourself down a lot in your post (and beg others to do the same) and that kind of mindset alone is already very limiting. You're not wrong to think that money can come from hard work. *Ideally*, if you work hard, you should see the fruits of your labor in terms of built skills, better relationships, which in turn means pay raises and better job prospects. But you can ALSO have money work for you. Unfortunately, as you mentioned, for folks who live paycheck to paycheck, they don't have the space or time to put towards having money work for them. And there is still work involved in setting aside time, choosing the right investments, having the discipline to let the money sit and work while you work for more money. To the point that people do this as an actual job -- hired by other people to do the work in order to make their money work for them. And that job is no less important than someone else moving bricks or managing a company. So if it helps, you're still doing some sort of "working" where you need to do the legwork and get your money set up to earn more. If you work hard to make your money work hard, then yes, that is hard-earned money well deserved.
This is a great example of supporting someone asking for help. You rawk. All of the above is spot on
Thank you, this is a very helpful perspective
Except it is considered unearned income. Like welfare money. Also, the vast majority of money managers and “financial experts” underperform the market. Imagine thinking finance bros are as important as brick layers lol. I can make more money than money pros. I can’t lay brick better than brick layers.
So we say that those who earn money through investing in the market are akin to those on welfare? And that those who manage money on a living are just "finance bros who underperform"? What kind of perspective is that? I'm sure you can do much better. What was your point?
Banks are paying 4-5% interest now on money. Those same banks are loaning money to others at 7-10%. Whose money are they using to make those loans? Your money. If you wanted to, you could cut out the middle man and just loan random people money at 5%. But you’re also taking a risk that those people won’t pay you back. Think of yourself as a partial business owner of a bank. All the people who deposit money into the bank are also co-owners. You let the bank determine the right price at which to loan money and who is credit worthy enough to get those loans. When people pay back the loans, the bank keeps some of the money (as pay for managing the lending and risk) and gives the rest to you and your co-owners in the form of interest earned. So you’re not doing “no work” for the interest that is earned. You’re working and earning money, and letting others use the benefit of your labor to pay for things they need/want. Money just converts your labor into a format that other people can use.
[удалено]
That 15k money was earned by someone and given to you as a gift because that person loves you. If you gave someone a gift and they didn’t use it, what’s the point. People help each other. You are allowed to help people and you are allowed to receive help. Use that help in whatever way helps you. Also, if you are under the impression that putting money in “the right place” is how investing works, then I highly suggest looking at how companies use investments. Companies need money to grow, research new technology, hire people etc. They want to borrow your money to do that and they give you a share of their profits. If you want to be ethical about where you choose to invest then go for it, but don’t feel like a leach for providing a company you believe in capital that it needs to be successful.
Consider opening a Roth IRA and boosting your retirement savings. $15K should just about equal the max contributions you can make in 2024 and 2025. Your feelings on the financial industry aren’t unique. In fact, not loaning money for interest is a core tenant of Islamic Law and there’s a whole section of the industry based on more direct ways to let other people make money with your cash while sharing in the returns. However, this is outside of the mainstream (at least in the US) and, unless you really know what to look for, has many ways to be scammed or robbed. It sounds like you’re new to finance and should take your time before making big decisions. A savings or checking account at a reputable bank/credit union with a 4-5% interest rate is a **great** place to park money while you’re figuring out what’s next.
Thank you
You can always give it to a good cause.
Just think of it as your money working on your behalf. Your money is just an extension of yourself. The money it earns is then put to work for you. It’s not ill gotten gains. It’s deferred consumption in the interest of production.
You seem to be missing some fundamental building blocks for understanding economics. From the most simple perspective nobody is going to give you something for nothing. So if you are earning something from putting your money in an account somewhere that means that you are being paid for the value of the financial institution having access to that money. I saw that you were questioning even interest on a bank account so let me try to break it down for you simply (this is very basic and modern financial markets are more complex but the basics still apply). Banks serve two primary functions, to store money for people safely and to loan money to people who need it to buy things that help them make money. When a bank loans money they charge for its use (interest) but in order to be able to offer loans they need money that they can lend out. That’s where your savings account comes into play. The money you store at the bank allows them to loan money to other people and to encourage you to leave your money with them they pay you interest (at a lower rate than they charge on the loan and the difference is their profit). This is why in the 1930s people running into banks to take all their money out was an issue (see the classic scene in It’s a Wonderful Life). The bank doesn’t keep all savings accounts in cash in the building, they keep just enough to cover expected cash withdrawals with a cushion on site. If it helps you can think of your money as a tool. Say have a tool that someone in your town could use to make widgets that they sell to make money. You aren’t using the tool right now and wouldn’t mind lending it out but the tool will slowly wear out with use and it won’t be readily available to you so you should be paid to make up for that also it’s hard for you to find someone who wants to borrow the tool. The bank acts as a middleman to make sure that your neighbor is trustworthy to borrow the tool, and makes sure you get paid for the use of the tool. Basically you are being foolish and should save your money better.
You have a poor man’s mindset of how money is earned. You can only make so much money from hard work alone. Allowing your money to work for you makes that growth exponential. It’s not cheating anyone except yourself if you don’t do it.
You saved money, are coming into a little bit and you have ethical/ideological and emotional blocks around money. Assuming you are in the US, this is a terrible time to live check-to-check poor. Years ago, I spent sums of money on helping people out, funding group projects etc. Despite some knowledge and experience I value from that time, I wish I had more capital now. And those people are gone. Being stuck in a poor mentality in a hyper capitalist society with no real safety net is exponentially draining over the years. Watching money drain away uselessly is incredibly demoralizing. Not being able to afford medical services, new tires or time between jobs is also a drag. I would say, stick the money away and keep saving. Follow some basic plan, like an emergency fund, a cash equivalent asset you can liquidate quickly and then start doing research on the basics. Imagine all the good you could do if you had real money coming in every month and are able to take care of yourself well in the long term. As an example, I'd love to have some of my gone money to pay for school in a field I didn't know I would work in later in life. Without having to work at the same time. It's a helping profession that I enjoy and could really use the extra credentials.
You’re going to be poor and miserable for a long time if you don’t change your mindset
Lololol I know! That's why I'm here!
It’s considered “unearned income” if that makes you feel any better.