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Why should the interest rate on your savings account be greater than the rate of inflation?
Wiki User
∙ 13y ago
We cannot say that the interest rate on our savings account should be greater than the rate of inflation, but we can say that the interest earned on our overall savings or investments should be greater than the inflation rate. That is because:
Let's say you invested Rs. 100 in a bank that gives you 3% interest every year, which means your 100 would have grown to be 103 by the end of the year, but if the country's inflation rate if say 8%, something that was 100 rupees last year would be costing 108 rupees now which means your money has effectively lost its value. That is why we must invest in instruments that give us returns that are alteast greater than the inflation rate.
Wiki User
∙ 13y ago
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Does inflation rob you of your savings?
Yes and no. If your "savings" are not in a savings account, then technically yes. This is because your savings will slowly lose its purchasing power as inflation happens (emphasis on slowly, you will only "lose" 1-5% annually unless inflation spikes in a bad way). If your savings is in a savings account and is accruing interest, then no. This is because the interest will make up for the inflation.
How can you calculate the loss of real value in a 10000 savings account if inflation is 10 a year for 3 years versus the loss of real value if inflation remains around 3. How much less would that savi?
...savings account be worth if inflation goes up? (For this exercise, do not consider interest paid.)
What's one difference between a checking account and a savings account?
savings account earns interest.
Explain who loses from inflation and who loses from unemployment?
explain who loses from inflation and who loses from unemplyment
Difference between current account and savings account?
A Savings Bank Account is the basic type of bank account where customers can park or save their surplus cash. The money in the account is extremely liquid and can be withdrawn by the customer anytime they want. As a result, the interest rate provided by the banks on such accounts is also very less. In india the savings account interest rate is 4%. Banks may also give you cheque books and ATM/Debit cards to operate your bank account. A current account on the other hand is an account used predominantly by businessmen. There usually a higher number of transactions that are allowed in a current account when compared to savings account and it also earns much lesser interest than a savings account.
Does inflation rob you of your savings?
Yes and no. If your "savings" are not in a savings account, then technically yes. This is because your savings will slowly lose its purchasing power as inflation happens (emphasis on slowly, you will only "lose" 1-5% annually unless inflation spikes in a bad way). If your savings is in a savings account and is accruing interest, then no. This is because the interest will make up for the inflation.
What is a compound interest savings account?
Its where your savings account earns interest on the interest.
How can you calculate the loss of real value in a 10000 savings account if inflation is 10 a year for 3 years versus the loss of real value if inflation remains around 3. How much less would that savi?
...savings account be worth if inflation goes up? (For this exercise, do not consider interest paid.)
What different Capital One accounts are there?
There are two different account for Capital One users. These two accounts consist of a chequeing account and savings account. The savings account accumulates greater interest.
What are the best account rates for high interest savings?
High interest savings just aren't as high as they used to be, thanks to the low interest rates being set by the fed. If you are able to find a savings account giving greater than 2%, consider it too good to pass up.
Savings account A has 1500 and pays 3.5 percent interest yearly Savings account B has 1400 and pays 4 percent interest yearly The savings account that earned the most interest after one year is?
Account B
What's one difference between a checking account and a savings account?
savings account earns interest.
What makes a savings than a checking account account a better investment?
A savings account earns interest.
What is considered to be a high interest savings account rate?
High interest savings account rates vary, depending upon the bank a person selects. A higher interest savings account rate could be anywhere from 0.75% to 1.00%.
What type of interest rate can you expect from a high yield savings account?
Interest rates vary depending on the bank the savings account is in. For a high yield savings account, interest rates can be from 0.95-3.0% annual percentage yield.
What is an example of interest-bearing account?
An Interest bearing account is a bank account in which, the banks pays you an interest for keeping your money deposited in that account. Ex: Savings Bank Account - You usually get around 3.5% rate of interest on the money you hold in your savings account in India.
How can one obtain the best interest on savings?
One might obtain the best interest on savings by looking at the different interest rates banks offer and opening a savings account with that bank. Another way to obtain the best interest on savings is to open a Tax Free Savings Account.
