A Good Lesson in Savings

We had a little exercise about how a bank works. It was very simplistic yet effective.

Marisa (saver) gave me $20. I (bank) took her money and lent it to Alex (borrower). After a few seconds, he repaid his loan, he gave me $22 (principle + interest). After a few more seconds, I gave Marisa $21 and I kept $1. They both saw that they can actually make some money by putting it in the bank.

Immediately after the exercise, without any prompting from me, they went to their wallets and took out some of their cash (Alex gave me $5 and Marisa $4.50) and instructed me to put it into their savings account.

I have their savings accounts at ING Direct. It is an internet bank, and it is a convenient way for me to manage their money. Right now they are paying 4.0% interest. This is significantly more than the local brick-and-mortar banks. They also maintain a kid friendly site that teaches about money called Planet Orange.

I would recommend opening an account here. If I refer you and you deposit $250 or more, then you will receive a $25 welcome bonus and I will receive $10 refer-a-friend bonus. Just send me an email so that I can send a referral to you. Or, you could leave your name and email address in the comment box. I'll delete the comment as soon as possible.