Years ago, Savers were rewarded with pretty decent interest rates when investing money at their local bank… not the case today.
The only leverage right now between you and the bank is held by them. You may find decent interest rates to borrow money from the bank, but they won’t give you much to park money with them. The truth is, the money they’re loaning you, is someone else’s money they’re leveraging!
Let’s take a look at how the bank leverages this money using the ‘Fractional Reserve Banking System’:
Click the video below to hear Tony explain why it is important to leverage your money!
For every 100 dollars you put in the bank, they might pay out 1% interest to you on that money, or $1.00. Then, using the “the fractional reserve system” they leverage this money by lending up to 9 dollars for every dollar they hang onto. In other words, they are able to loan out $900 dollars on the $100 you gave them! Imagine that they loan out that money with a 3% interest rate to people who need the money. In turn, they end up making $27 and a profit of 26 due to the $1 they had to pay you. Pretty impressive return on your investment… and you only have ‘a buck’ to show for it!
Tony has found there are three ways to leverage your money in this low-interest rate environment:
