Why do banks accept deposits? Explain with fingers Automatic translate
Almost everyone can open a deposit, and the bank will charge interest on the amount invested. This will allow you to have passive income that can cover inflation.
Few people have questions about why banks pay depositors at all. Most people simply dream that someday they will be able to open a deposit of several million and live comfortably on only one percent. But how does it all work? Is it possible to get rich by investing?
In order for a bank to make a profit, it needs to have money. This is how it works: first, the capital is invested, and then it makes a profit. It turns out that the bank needs to attract this money in order to earn. He can take a loan from the Central Bank or receive funds from citizens.
Further, the bank uses the borrowed money for its own benefit:
- Creates reserves.
- Buys foreign currency for speculative purposes.
- Issues loans.
- Invest in different instruments.
The usual example would be a loan. The bank accepts a deposit from the client, promising, let’s say, 10% per year. And he gives out a loan with this money to another person at 20%. It turns out that the difference of 10% will be the profit of the lender. How it works in practice - you can study here on the calculator on the financial portal Vyberu.ru
It is clear that the bank is not a philanthropist in this case. He himself receives even greater financial benefits. In the end, everyone is satisfied. The bank earns and the depositor receives interest.
About interest rates
Dreams of living on one percent are utopian. The fact is that interest on deposits depends on the key rate of the Central Bank. And it, in turn, is set taking into account current and projected inflation. If you do not go deep into all the subtleties, then the interest rate on deposits in banks will be little different from the rate of depreciation.
This means that you should not count on real income. Suppose a deposit was opened in the amount of 1,000,000 rubles at 5% for 1 year. And inflation for the same year was 4%. After 12 months, the depositor’s account will have 1.05 million rubles. No one forbids you to withdraw interest (50,000 rubles) and leave your million on deposit. However, the real value of this million will already be lower. Roughly speaking, what could be bought a year ago for 1,000,000 rubles now costs 1,040,000 rubles.
Now it is worth imagining that for 10 years inflation will always be 4% per year, and the depositor will annually withdraw accrued interest and spend. In 10 years, due to inflation, a good that could be bought for 1,000,000 rubles will cost 1,480,000 rubles. It can be seen that living on interest is unprofitable financially. Here, official inflation was also taken into account, and not actual, which may turn out to be higher. Therefore, the deposit is more suitable for saving capital from depreciation.
There is a possibility that even the deposit will not save you from inflation. This is possible in two cases:
- If the inflation rate eventually turns out to be greater than the return on the deposit.
- If the depositor closes the savings deposit ahead of schedule, the interest will be recalculated at the lowest rate.
But it’s still better to keep money in the bank than at home, where there will be absolutely no protection against inflation.
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