No Chickens Were Harmed In the Making of This Post

I don't care what the cost is, I'm going to post another.. post.. even if it kills me (see figure 1, left)! Okay, maybe not to that extreme.

Let's talk about banks! No no, don't leave, I promise to try making this fun, really! In fact, just for you, I'll make an analogy that might work better. Just for you!

Let's imagine all the times that you gave people money so that they would pay you back. Now imagine, for the sake of argument, that they actually did pay you back. Tough concept I know, but bear with me here. Then imagine that they were even kind enough to give you something extra for the trouble of giving that fat wad of cash over to them at such short notice. That extra is the interest to your loan. And ta-da, you have more money than before!

That's basically what banks try to do as much of as possible, so that they can get as much interest as possible, and make as much extra money (or profit) as possible. But in order to keep giving out money to people and get back a profit, they need lots and lots of cash (or in fancy economics terms, capital). And where do they get that money from? That's right, your savings account. If you want to get technical, they're using your money to loan yourself money. If that didn't make sense to you don't worry, since it barely makes sense to me either.

And so, that tiny little percentage of interest that you get added by the bank to your savings account is actually another tiny percent of the massive amount of interest that that banks get from loaning out your money. Remember, the profit you make from keeping your money with them is waay smaller than that profit they make from giving out your money.

And just for kicks, here's a drawing I just made to show what I just said. You are at the left, the fat one is the banker (I thought a stereotypic view might be more understandable (they're not all fat..)), and the one who is sideways is the borrower (the person that takes the loan from the bank). Oh, and the + means interest, and the one given back to you is smaller than the one given to the bank. It probably doesn't help, but I really wanted to draw it.

Just an update :)

Hey, remember us?  We used to have a blog... So we've kind of fallen behind in posting, no biggie.  "Personal finance" courses will be available as an elective at certain high schools starting 2011-2012 school year! (yeeah!)  We're working on the curriculum right now, so if any of you have suggestions as to what should be on it, feel free to leave it in the comments.  Otherwise, just make sure to choose it next, next year.  Course outline will be posted as soon as we finish it!

And yeah, we'll try to post more often... that might help our cause a bit ;)