The dreaded interest payment. It can add years to the life of a loan. What should be a $150,000 mortgage can quickly skyrocket to over $350,000 with the addition of interest payments over the course of 30 years. Startling statistics show that paying off a $5,000 credit card balance can take over 10 years by making only minimum payments if the interest rate is around 12%. That’s insane!
Clearly, this is why banks love interest payments, but why should you? The answer is simple. What if those same interest fees that you would pay on debt suddenly turned into income for you? That’s right, what if you were the recipient of interest payments? Now we’re talking!
Don’t get me wrong, I’m not suggesting that you start the Bank of Single Parents, that’s not reasonable. What I am suggesting is that instead of drowning in credit card debt, student loan payments, and/or unreasonable mortgage debt, giving away your hard earned cash, park your emergency fund in a high interest paying bank account then watch the balance add up to note-worthy amounts. Sounds great, huh?!?
Take it a step further and invest in your retirement account so that your rate of return on dividends and stock market increases act as interest payments to turn yourself into an everyday millionaire. It can be done!
Now I can hear some of you screaming “I don’t have any money,” and “How can I save when I’m a single parent,” but I’m here to remind you to read my articles on why you MUST pay yourself first, how to start saving when you’re a single parent, and why you need to set smart financial goals. When you combine a great debt reduction plan, as explained in my Dave Ramsey post, then saving becomes a reality, stress is greatly reduced, and you are able to spend quality time with your kids, being the awesome single parent that you are.
Remember, raising kids alone does not mean you are destined for debt and despair. It just requires you to think differently, set new priorities, and be more kind to yourself. Despite the statistics, single parenting can and should be enjoyable, even if you struggle with the daily routine.
As a single parent, I had to reassess how I thought about my situation and learn to look for the good. Sure, some sacrifices have to be made, but not at the expense of saving for retirement and factoring in some me time too.
Check out my resources page for financial calculators and tools to help single parent families thrive, not just survive. It’s within your power to be a happy parent, raising wonderful kids, despite the situation you find yourself in.
Growing money is fun and exciting. Parking your emergency fund in an account earning 2% interest may not sound like much, but its better than paying 2%. For example, as your wealth builds due to earning 2.2% on $25,000, you can get $550 the first year. As interest compounds, or adds up, in year two you’d earn 2.2% on $25,550 instead of just $25,000, which amounts to a new balance of $26, 112.10, just for leaving the money in the bank. Each year, you earn interest on the new balance, not simply the initial $25,000. Over 30 years, the final amount is really nice totaling over $70K! Change the situation to earning the market average of about 12% each year and the result skyrockets to over $2.2 million! Wow! Click the link here to play with the numbers and see for yourself how fun earning interest can be.
That’s it, in a simplified nut shell! So what are your plans for earning interest payments? Share in the comments below.
Happy Saving! Live Well!