OCR Text |
Show BanMng BitS by Lee Bean I ; I Q. "How do banks make money? Do they perform a necessary service?" A.Banks make money by earning interest on loans to businesses and individuals, indivi-duals, and from interest on investments. Sometimes Some-times Banks charge service fees for processing process-ing such as those joint checking accounts. Banks act as middlemen middle-men between savers and borrowers. They pay interest on the money deposited with them. Before money existed exist-ed we lived on a barter economy. We didn't exchange pieces of paper for the things we wanted to buy, as we do now with checks or cash. We exchanged the things themselves. But this was awkward. If you wanted to buy a grand piano, for instance, and you raised pigs, you would have to wait until you got enough pigs together to-gether in one place to equal the approximate worth of the piano. Then you would have to find somebody with a piano who wanted your pigs. Finally, you would have to herd all account at the bank, that money would earn interest for you. Your money, instead of sitting there, waiting for burglars or a flash flood, would make money. The Bank will do it for you. The bank can do this because the money you save can be lent to other people who need loans. The interest charged on these loans keeps the bank in business. Part of this profit goes back to you, as interest on your savings, for giving the money to the bank in the first place. If you don't want to wait until you've saved enough money - that might take years - you can get a mortgage loan from the bank, and pay it back while you're actually living in your new house. The time is coming where very little cash will change hands. Credit cards and in-sant in-sant computerized services ser-vices will mean speeding speed-ing up a bank's ability to help you make financial transactions. As your personal income grows, you will find it more convenient - even necessary - to use a bank's services. VV. LKK BEAN your pigs together and deposit them bodily in a designated spot, wriggling wrig-gling and squealing. It's much easier to sell your pigs to the bacon dealer for money, and use the money to buy the piano. In the same way, it's easier to use a bank's special services than to try to complete the same transaction on your own. Suppose you needed money, to buy a house. You could save the money you earned in a sock under the bed until you had enough. Then you could pay cash for the house. But if you opened a savings |