Interest and Percentages, Part 1 – Thinking Like a Banker

Interest Percentage Pie Chart

How do interest and percentages stack up?

Over the last couple of years, I have come to realize how important it is for us to think strategically—and very differently than most of us were taught in school—about interest and percentages.

I think the first time someone brought this to my attention was when one of my advisors asked, “What does your bank pay to borrow money from you right now?”

At the time, I think I was receiving about 0.1% interest on (some of) my deposits. (Many pay nothing at all. And if I were living in Europe or Japan, they would be charging me interest for parking my money with them.) So I said, “Let’s say 0.1%.”

“Okay,” said my advisor. “And how much are they charging in interest if you want to borrow from them?” (more…)