← Money Foundations · lesson 10 of 10
By the end of this one you'll know every common place a hundred dollars can go and exactly what happens to it at each stop, so none of the options are a mystery again.
Think of that hundred like a new animal showing up at the farm gate, before anything else you have to pick a pasture, and every pasture feeds different. The drawer pasture is cash at home, nothing can touch it there but nothing feeds it either, and inflation, the slow rise of prices, quietly thins it a little every year. The everyday bank pastures are checking, built for moving money around, and savings, built for holding money while it collects a little interest, which is rent the bank pays you. The bank pasture folks forget is the CD, short for certificate of deposit, a deal where money gets locked up for a set time in exchange for a set rate. The market pasture is a brokerage account, an account for buying investments like shares, small pieces of real businesses, where the animal can fatten up over the years or come home leaner, no promises live in that pasture. The long pasture is retirement accounts, with tax breaks attached and gates meant to stay shut for decades. Then there are the two pastures almost everybody forgets. One is paying down a debt, which stops interest charges from bleeding you every month. The other is spending on a skill or a tool that earns, which is feeding the farmer instead of the animal. My job tonight is to walk the whole fence line with you, your job is to know every gate before you ever open one.
Same lesson, told by a hundred dollar bill. Tap to walk it one step at a time.
Same example 100 dollars, one year at each stop.
In the drawer it still says 100, but at 3 percent example inflation it buys about 97 dollars worth of groceries.
In savings paying 4 percent a year it becomes about 104.
In a broad stock fund, a basket holding little pieces of hundreds of companies, real past years have handed back anywhere from about 80 to about 130.
Put against a credit card charging 24 percent, that 100 keeps about 24 dollars of interest from ever being charged in this example, and notice that's a fee avoided, not a return earned, a different kind of math than anything else on the tour.
You fronted 100 dollars of your own money for supplies when you ran the school fundraiser, and a month later the repayment envelope finally comes home in your kid's backpack. Three things tug at it before you even open the flap: a credit card carrying a balance, a skinny savings account, and your work boots that are falling apart.
Pick your move. Then peek at the other roads if you're curious.
Every dollar you get lives somewhere, and knowing what each pasture honestly does to it is the whole education, no menu and no best pick required.