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Hello? Yes? Mom? Yes, what happened? Uh, actually… So, you're out of money already? Actually, yes, because it's close to the end of the month… So, I was wondering if you could send some… Man, I'm so hungry. No, Srishti. Don't give in. Don't order in again. It's a Saturday afternoon. Just get some groceries. Anyway you need to save money. They have chocolate spread! At least when I get hungry in the evenings, I won't be tempted to order sandwich from Guptaji. I'll get my own from my home. I should get some instant noodles for late night cravings. There's a 10% discount on avocados! This is it, Srishti. Your journey as a master chef begins here. Guacamole and responsibility, both! Wow! Oh no, that's a lot. Should I take something out? But I do want everything, and I'll use it all, I promise. Okay, just this once — treat yourself! I deserve this today. I've had such a shitty morning. I'm going through so much. Seven rickshaws refused to take me today. I deserve this ice cream. How can he just leave me like this, man? Hey! This lipstick is so cheap! You know what… I'm going to wear this lipstick and win this breakup. Okay Srishti, we're leaving. What are you up to? I'm also leaving. The train is going to be so crowded now. If you're so tired, take a rickshaw or a cab na? No man, it's too expensive. It's raining outside, and you've got your laptop. Don't take a risk, book the cab. You're actually right. Okay, I'll book a cab. Man, it's already so late, and the train will be crowded again today. Okay, so today I'll take a cab, and then tomorrow, I'll walk to the station. Exercise and saving money! Wow, you're such an adult, Srishti! It was 250 last time. It's so less this time, in comparison. I'm practically saving money on this. This is over already? Urgh, I'll have to go out and order another one. Oh man, they're having a sale! No, no, no, no, no, no, no. Just put your facewash in the cart and get out of here. Just get lost, man. I don't want to pay for shipping. Okay, now get into the wishlist and look for the cheapest thing. Why am I like this? Not a single thing in this wishlist is below 200 rupees. Mmhmm this nail polish is cute. And it's exactly 50 rupees, all the stars have aligned, okay done, I'm getting it. But, which colour do I get? Both these colours are cute. Should I just get both? Ya, come on, I can manage 100 rupees. Oh, there's 40% off on the entire brand? I'm just going to look. I'm just going to look. Window-shopping, I promise. Okay so, that means no shopping next month, and I feel, no more ordering in this month, either. Mom? What happened? Uh, actually… So, you're out of money already? Actually, yes, because it's close to the end of the month… So, I was wondering if you could send me some… This is not done. If we didn't have the money now, how would we have given it to you? No, you're right. — No, you're right. — Where's your sense of responsibility? No, yes, thank you. — No, yes, thank you. — Okay, enough thanking me, how much do you need? F…f…Seven thousand.
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Are you looking for a better alternative for your money outside of the bank? Beterment has come up with an interesting solution to this problem with the introduction of Smart Saver. This option will help you to protect the buying power of your hard earned money!
READ 📕 Betterment Smart Saver Review:
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– So my goal in this video is to convince you, in the next five minutes, why the bank is a terrible place for your money, and I'm also going to provide you guys with a much better option than just putting your money into the bank and letting it sit there. So, this is a concept that is nothing new. A lot of people have known this for a very long time, that, thanks to something called inflation, leaving your money sitting in the bank is actually a terrible option when it comes to preserving the purchasing power of your money. And mainly what I wanna do here is explain this concept in case this is something you have never learned before. So if you are learning this for the first time, please drop me a comment down below just so I'm aware of how many people never heard of this concept before. Or understood that you're losing the buying power of your money thanks to inflation. Now, real quick, before I get into the video, I wanna give a quick shout out to Jeff Rose because he inspired this video. He posted a video talking about why banks are a terrible place for your money, and he gave a couple of other interesting ideas of where to put your money instead of putting it into a bank account. So I'm gonna link that video up down in the description below because it absolutely inspired this one, so thanks for putting that video out Jeff, awesome video there. Okay, so the first thing I want to talk about here is a survey that GOBankingRates conducted back in 2016, looking at what percentage of Americans actually had money in their savings account, and how much they actually had saved up. And what they found is that 34% of Americans have $0, absolutely nothing in their savings account, and 35% have less than $1,000. So this is primarily focused towards those who have $1,000 or more sitting in your savings account. But even if you have less than that there are still better options than leaving your money sitting there in a checking account, or a savings account, and I'm gonna show you guys exactly what that is at the end of this video. Let's go ahead and take a step back here and go over some basic personal finance lessons by defining a couple of terms for you guys. First of all, what is a savings account? A savings account is simply a place to put your money that you are saving, and this is money that is completely liquid, you have very easy access to this money. And then the other one that goes hand in hand with this is your checking account. And the only difference between these two accounts, typically, is the ability to have a debit card and do withdrawals and deposits from your checking account, where you're not going to have a debit card with your savings account. And that is primarily what these two things are supposed to be used for. The savings account is used to hold onto your extra money that you need to keep in liquid form, and the checking account is used to pay bills. But, what we are finding is that people are keeping way too much money in one of these two accounts and, as a result, they are losing the buying power of that money because interest rates are extremely low on these accounts and inflation is significantly higher. And just to cover those two terms for you guys, inflation is basically the deterioration of the buying power of your money. Basically, the best is example is it was a lot cheaper to buy bread in the 1920s than it is to buy bread today because of inflation. Prices have increased and the buying power of each dollar has decreased. And then your interest rate is simply the amount of money due based on a deposited sum of money. So when you put money into the bank, into a checking account or a savings account, or some kind of certificate of deposit, they are going to give you a certain percentage of that money back every single year. Now, before you guys get too excited about that, I'm about to shatter that and show you why that's actually terrible. They're really not giving you, pretty much, anything. So, according to Bankrate, the average yield for a checking account here in the United States is 0.06%, and I will tell you this, I did a video on this topic about a year ago and it was 0.05%, so we've improved by 0.01%, so we can all celebrate about that. But, obviously guys, that is a terrible yield for the checking accounts. And we understand that inflation typically sits around 2% per year. But what exactly does that mean for those with a high balance in their checking account or their savings account? If you have $10,000 sitting in a checking account for one year, you are going to earn $6 in interest from your bank. You're gonna, basically, earn enough to buy, I don't know, a couple of Starbucks coffee. But you actually didn't earn any money at all thanks to inflation. In fact, you lost $200 dollars of buying power, even though you earned that $6 of interest. So your actual loss over that year is $194. So, even though you earned $6 in interest, your buying power deteriorated by $200, resulting in a loss of 194. And there are plenty of people out there with $10,000 or more sitting in a checking account or a savings account. Or, possibly, some kind of certificate of deposit with a yield that is lower than the rate of inflation. Now, it's even more drastic, or severe, when you look at people with an even higher balance in their checking or savings account. So, take somebody with a $100,000 balance. If you give the bank $100,000, and they hold onto it for one year, they're gonna give you $60 worth of interest, which is, again, nothing. That's gonna pay for a dinner at that point in time. But what most people don't understand is that, thanks to inflation, you lost $2,000 worth of buying power on that $100,000, meaning your actual loss here was $1,940 over the course of one year by leaving $100,000 in the bank. And if that's not scaring you guys, I don't know what will, because if you're losing about $2,000, without even knowing it, then that's a pretty scary fact here. And my best comparison, that I've heard of before, for inflation, is that inflation is like termites. Day by day, you don't really notice the affects, but over the course of ten, 20, 30 years, the entire house can come crumbling down, and people can get wiped out by inflation by holding onto cash. And that is why people who save cash in the bank lose money every single year. And the best rule of thumb to follow is, if interest rates for bank accounts stay around 0.06%, for every $100 you have in the bank, you're gonna lose $1.94 to inflation every single year. So, what are we gonna do about that? I have a solution I wanna share with you guys. And that solution to this problem here of keeping up with inflation and protecting the buying power of your money, comes to us in the form of short-term bonds. Now, if you guys are anything like most people I talk to, you have no idea what a bond is. Maybe you have a couple of them sitting in your parents safety deposit box under their bed, but other than that you have no idea what these are. So, I wanna give you guys a really quick finance lesson here so you understand what exactly these are, and how short-term bonds differ from your checking account or your savings account. So, a bond is, very simply put, a debt obligation. It's an agreement to pay back dept over a certain period of time. And, basically, the issuer of this bond is agreeing to pay you back at a fixed rate, or it could be a variable rate, over a certain period of time. Now, as far as bonds, a lot of people on my channel learn about stocks and the stock market, and bonds are a more conservative investment than that. Don't really get as much coverage, they're just kind of boring, at the end of the day, but think about a stock as equity, owning a piece of a business. Whereas, if you are a bond holder for a company, you are basically like the banker, you are just holding onto debt. So, people who invest in stocks get to capitalize on the growth of a company, but bond holders are only going to be paid back whatever the agreed upon yield is. They're not gonna capitalize on the growth of that actual company. So that's the difference there between stock holders and bond holders. Now, when it comes to bonds, there are three primary types. Number one, we have municipal bonds. This would be bonds to local governments or local villages, or cities. Let's say for example, your village or your city had to replace a road and they didn't necessarily have the money for it, they might take out a bond that you would be able to purchase as a municipal bond holder. Number two, we have corporate bonds. That is when companies are, basically, issuing debt and investors purchase that debt through a bond, because they wanna earn that fixed yield over that certain period of time. And then number three, we have the one that most people are familiar with, that is US Treasury bonds. This is, essentially, giving a loan to the US Government to fund ongoing operations, or to put it towards our massive debt shortfall. But US Treasury bonds are considered to be the safest, highest quality bonds with the lowest risk of default. And what I mean by defaulting is to not be able to pay back that person, and to basically fall short of your obligation to pay that debt back. And, as far as corporate bonds go, these are rated by Moody's and Standard & Poor's, based on the credit worthiness of that borrower. And higher quality bonds are going to command a lower interest rate. Lower quality bonds are going to command a higher interest rate, because of that risk, reward profile. But that's getting pretty nitty gritty here, guys, you don't necessarily have to know all of that to understand what we're talking about here. Now, what I wanna talk to you guys about, specifically, is a very easy to implement solution to this problem of losing the buying power of your money, thanks to a new feature of Betterment called Smart Saver. Now, just for the sake of transparency, guys, I am affiliated with Betterment, but the reason why I am sharing this with you guys is because I believe in this product, not because of any kind of benefit for you guys using it. I do provide an affiliate link if you guys want to sign up for Betterment under my link, but, by no means, do you have to do that. Smart Saver is, essentially, offering you a way to invest in these bonds and earn a rate of interest that exceeds the rate of inflation in a very low-risk manner, that gives you easy access to your money. So, instead of leaving your money in a checking account or a savings account, Betterment takes that money and invests it in a portfolio of very low-risk bonds. And, based on today's interest rates, their anticipated yield from this account, after fees, is 2.09%. Meaning that, since inflation sits around 2%, you are fully protecting the buying power of your money by using Smart Saver, and you're not losing that money by leaving it in the bank. And what Betterment has developed here is a very easy way for you to also get access to that money when you need it. So, let me walk you guys through the whole process, then we're gonna talk about what Betterment is actually doing with your money through its Smart Saver. Number one, this is obviously a feature reserved only for those who have an account with Betterment. If you guys don't have one, I provided a link in the description below, if you wish to use it. And I have also provided a link as well to Smart Saver if you guys are just looking to do some more research on this option provided to you. But the very first step is opening an a Betterment account. Number two, that is when you can enable cash analysis. And what that does is Betterment is going to link up to your checking account and your savings account to start to get an idea of your spending habits, and how much money you're spending a month. What are your regular reoccurring monthly expenses? And once they understand these figures, they're able to understand how much money you should realistically have in your checking and savings account at any given point in time. And then they enable a feature called the two-way cash sweep. I know that sounds confusing, but it's actually not confusing at all. When you have extra money in your bank accounts, based on them doing analysis of your spending, that money gets swept over to your Smart Saver account and it's invested in these low-risk, short-term bonds. That way it's protecting the buying power of that money. And then, when your account balance gets too low, they sweep that money back into your bank accounts. That way you have money available to pay your bills and if you are not a fan of that whole automated process, you can do this exact process yourself by monitoring the balances of your accounts. But if you're somebody like me, and you're very forgetful, this is a great option to have where they can, basically, automate this whole process for you, and help you protect the buying power of your money. So once your money is in Smart Saver, what is Betterment doing with that money? Well, they're taking 80% of that money and they're putting it into a bond fund of US short-term Treasury bonds. And that exact fund is SHV if you guys wanna check it out. I'll also link it up in the description below. And this is a short-term Treasury bond fund where all of these bonds are maturing within the next 12 months. So these are very, very short-term bonds and they are Treasury bonds. These have the highest quality of debt rating and it is very short-term bonds, meaning they are going to be paid back within the next 12 months. So we are talking about, basically, as low risk as you can go when it comes to investments, aside from some kind of insured investment from the bank, and those do not provide enough interest to even outpace inflation. And then 20% of your money goes into short-term investment grade bonds. Think about money being loaned to large American corporations, like AT&T or CVS, these are the highest quality companies that have been around for a very long time with very high debt ratings from Moody's and Standard & Poor's, and that is what is meant by investment grade. So these are very, very high-quality companies with long operating histories and a very well established track record. Picture yourself loaning money to corporations and companies like At&T, for example. And by doing this with your money, by sweeping that balance out of your checking and savings account and putting it into Smart Saver, like we said, right now they're looking at about a 2.09% yield after fees, meaning you're buying power's being protected and your basically doing nothing here. You are allowing them to analyze the cash balance of your account and sweep that money back and forth to make sure you are not losing out to inflation. Now, there are a couple of things that I want to talk about that differ when you look at having money invested in short-term bonds versus having money in some kind of bank. And the number one thing that I want to talk about here is FDIC insurance. When you leave your money in the bank, whether it's in a savings account or a checking account, or a certificate of deposit, you are, typically, FDIC insured for up to $250,000. That means that if that bank goes insolvent and they don't have access to that money for you, you're going to get that money back from this insurance up to $250,000 and you have to understand that there is no insurance in place for bonds. But before you get afraid of that, in order for you to lose the money that you invested with Smart Saver, we would have to see the US Government going insolvent and not being able to pay their debts back, and we would also have to be seeing major corporations, like AT&T and CVS and, think of the largest companies out there going bankrupt. It would have to be the worst case scenario of, basically, the government coming crashing down as well as large corporations, in order for you to lose the money you put in Smart Saver that's being invested in these short-term bonds. And the other thing that you have to understand is that there is about a four to five business day process between the money entering your account and leaving your account. So if you need immediate access to your money, this is probably not a good option for you. But if you would be okay with that, if you're okay with having to wait four to five days for that money to come back into your account, then that's not something that you would necessarily have to worry about, but I just believe that is worth mentioning. And there are a couple of other benefits that are associated with investing in US Treasury bonds, so I wanna go ahead and share with you guys what those are. Number one, as we said, they are pretty much the safest investment out there, outside of an FDIC insured bank investment, and those do not pay enough, typically to outpace inflation, or you do not have liquidity, you don't have ready access to your money. The second thing is that US Treasury bonds are exempt from local taxes and state taxes, so if you're worried about generating a large tax bill, that's going to relieve some of that burden. So it is a great investment for those two reasons because they are very safe and they, also, are easy on the tax bill. Now, is this the only option when it comes to protecting the buying power of your money? Absolutely not, some people look at CDs that are offered by a bank, some people look at money markets. But understand that if you do put your money into a CD maybe you're seeing 3% rates, but typically that's for a three to four year term, and if you take your money out early you're going to get a penalty. Smart Saver is essentially offering you protection of the buying power of your money with, pretty much, complete access to that money at any point in time, if you're willing to wait that three to five business day window for that money to come back into your account. And, like I said, if you guys are looking to learn more about other options, if you're not a fan of this, I have a bunch of videos about investing and other ways to protect the buying power of your money. And I'll also link up to that video that Jeff Rose did. And if you guys do want to check out Betterment or Smart Saver, I have a link down below. It is an affiliate link, you guys don't have to use it, but understand that by doing so, you are helping to support my channel and allowing me to make more videos like this. But thank you so much for watching this video. Like I said, let me know in the comment section down below if this is the first time you're learning this lesson, and make sure you are sharing this with other people who are, basically, losing money every single year by saving it in the bank. But thank you so much for watching, and I will see you guys in the next video.