Thoraiya DyerBeauty of Maths, Part 1: Savings Account Interest
April 20th 2008 00:06
Part 1 of The Beauty Of Maths probes the claim that an interest rate from a Building Society which is slightly higher than the competing banks can actually make a difference when trying to save up for a big purchase.
Item:
2 x TV advertisements for the Greater Building Society’s Bonus Saver Account. (Details here: Really Long Link )
What the TV ads depict:
a) Dweeb saving up for a motorbike that is really fast.
b) Loser Who Can’t Play Guitar saving up for a really loud amp.
What it actually offers:
7.5% interest on your savings, if you make a deposit at least once a month and don’t make any withdrawals.
Savings goals:
a) Very Fast Motorbike.
A Honda CBR 1000RR Fireblade (2007) will set you back about $18,800 (see www.tradingpost.com - if anyone in the Northern Territory wants to buy this bike, contact Precision Honda, 436 Stuart Hwy, Winnellie on 0889844876!)
b) Very Loud Guitar Amp.
A Mesa /Boogie Dual Rectifier Roadster Combo has normal price listed as $5,985 (buy it from Muso’s Corner, http://www.musoscorner.com.au )
Incomes:
(Note: The Australian Bureau of Statistics only has data as recent as 2003).
Let’s assume the Dweeb actually has a job. Average wage in Newcastle, NSW is $36,406. That’s close to $700 per week. Minus 28% income tax, and he’s bringing in $504 per week.
Meanwhile, there’s no way the Loser Who Can’t Play Guitar has a job. Let’s give her a year’s worth of Youth Allowance dole payments, or $13,215. That’s about $254 per week, tax free.
Now, how much money do people typically deposit into a savings account?
The ABS can help us here. If we look at the 2003-2004 Household Expenditure Survey, we find that the largest broad categories of household expenditure were (i) food and non-alcoholic beverages, with average household expenditure of $153 per week, (ii) transport, at $139 per week, and (iii) current housing costs, $135 per week.
That saps $427 a week from Dweeb, leaving him with $77 per week. We’d also better deduct his share of the electricity and phone bills at whatever dive he is sharing with junkies…well, the junkies probably won’t be able to pay, so he’ll have to shell out the entire $60 a month himself. That leaves him with $62 a week to spare. Assuming he doesn’t spend ANY of it on getting pissed, buying biker clothes and boots or visiting the doctor for the treatment of crabs, that is the maximum he can deposit into his Greater Bonus Saver Account.
As for Loser, she’s got a problem. Her weekly earnings aren’t enough to cover the average basic expenses. But never mind, let’s assume she’s living with Aunty Jill, who gives her free accommodation and meals. That takes her expenditure down to $139 per week. Subtracting another $60 a week for Stupid Hairstyle Maintenance, she is left with a healthy $55 per week to invest in her account.
Outcome:
Now, let us see the Beauty of Maths in Action.
Because my high school maths is a little shaky, I have cheatingly used Coolmath’s Annuity Calculator from www.coolmath.com , but if you weren’t going to make regular deposits, you could easily use the compound interest formula kindly provided by Viacom, here: Really Long Link
If Dweeb invests his $62 per week = $248 per month, at 7.5% over 2 years, he will have a mere $6440.07 = NOT enough for a fast motorbike!
But, you ask, what would the difference be if he had invested at a lower rate, somewhere else? Perhaps in a St George or Commonwealth Bank account, with a rate of a measly 7.0%?
Two years down the track, Dweeb would be sitting on $6406.05, instead, which is just $34.02 less than what he would have had at the Greater. Hardly the basis for advertising that You Will Reach Your Goals Faster With The Greater, eh??
Well, $34 might buy him one biker boot. Maybe not - they are $200 a pair. And it certainly wouldn’t cover the vet bills for the miniature donkey he still has to ride.
How about Loser Who Can’t Play The Guitar? She’s been plugging $55 a week, or $220 a month, into the same type of account. What does she end up with?
A whopping great $5712.96 is what!
So she can ALMOST buy the amp, (but not Dweeb’s motorbike).
Which just goes to show, it’s not the Greater who is your friend, but your local Centrelink, instead. If you want a fast motorbike, don’t try and get anywhere with a real job, paying rent like a schmuck.
Moving in with Aunty Jill and going on the dole is a much better option. Of course, if you don’t have the luxury of an Aunty Jill, you better get an economics degree and start working your way up the corporate ladder, or else send your champion x-box playing child to join the RAAF, because that’s the only way you’ll ever be able to put an $18 000 present in your Christmas stocking.
Item:
2 x TV advertisements for the Greater Building Society’s Bonus Saver Account. (Details here: Really Long Link )
What the TV ads depict:
a) Dweeb saving up for a motorbike that is really fast.
b) Loser Who Can’t Play Guitar saving up for a really loud amp.
What it actually offers:
7.5% interest on your savings, if you make a deposit at least once a month and don’t make any withdrawals.
Savings goals:
a) Very Fast Motorbike.
A Honda CBR 1000RR Fireblade (2007) will set you back about $18,800 (see www.tradingpost.com - if anyone in the Northern Territory wants to buy this bike, contact Precision Honda, 436 Stuart Hwy, Winnellie on 0889844876!)
b) Very Loud Guitar Amp.
A Mesa /Boogie Dual Rectifier Roadster Combo has normal price listed as $5,985 (buy it from Muso’s Corner, http://www.musoscorner.com.au )
Incomes:
(Note: The Australian Bureau of Statistics only has data as recent as 2003).
Let’s assume the Dweeb actually has a job. Average wage in Newcastle, NSW is $36,406. That’s close to $700 per week. Minus 28% income tax, and he’s bringing in $504 per week.
Meanwhile, there’s no way the Loser Who Can’t Play Guitar has a job. Let’s give her a year’s worth of Youth Allowance dole payments, or $13,215. That’s about $254 per week, tax free.
Now, how much money do people typically deposit into a savings account?
The ABS can help us here. If we look at the 2003-2004 Household Expenditure Survey, we find that the largest broad categories of household expenditure were (i) food and non-alcoholic beverages, with average household expenditure of $153 per week, (ii) transport, at $139 per week, and (iii) current housing costs, $135 per week.
That saps $427 a week from Dweeb, leaving him with $77 per week. We’d also better deduct his share of the electricity and phone bills at whatever dive he is sharing with junkies…well, the junkies probably won’t be able to pay, so he’ll have to shell out the entire $60 a month himself. That leaves him with $62 a week to spare. Assuming he doesn’t spend ANY of it on getting pissed, buying biker clothes and boots or visiting the doctor for the treatment of crabs, that is the maximum he can deposit into his Greater Bonus Saver Account.
As for Loser, she’s got a problem. Her weekly earnings aren’t enough to cover the average basic expenses. But never mind, let’s assume she’s living with Aunty Jill, who gives her free accommodation and meals. That takes her expenditure down to $139 per week. Subtracting another $60 a week for Stupid Hairstyle Maintenance, she is left with a healthy $55 per week to invest in her account.
Outcome:
Now, let us see the Beauty of Maths in Action.
Because my high school maths is a little shaky, I have cheatingly used Coolmath’s Annuity Calculator from www.coolmath.com , but if you weren’t going to make regular deposits, you could easily use the compound interest formula kindly provided by Viacom, here: Really Long Link
If Dweeb invests his $62 per week = $248 per month, at 7.5% over 2 years, he will have a mere $6440.07 = NOT enough for a fast motorbike!
But, you ask, what would the difference be if he had invested at a lower rate, somewhere else? Perhaps in a St George or Commonwealth Bank account, with a rate of a measly 7.0%?
Two years down the track, Dweeb would be sitting on $6406.05, instead, which is just $34.02 less than what he would have had at the Greater. Hardly the basis for advertising that You Will Reach Your Goals Faster With The Greater, eh??
Well, $34 might buy him one biker boot. Maybe not - they are $200 a pair. And it certainly wouldn’t cover the vet bills for the miniature donkey he still has to ride.
How about Loser Who Can’t Play The Guitar? She’s been plugging $55 a week, or $220 a month, into the same type of account. What does she end up with?
A whopping great $5712.96 is what!
So she can ALMOST buy the amp, (but not Dweeb’s motorbike).
Which just goes to show, it’s not the Greater who is your friend, but your local Centrelink, instead. If you want a fast motorbike, don’t try and get anywhere with a real job, paying rent like a schmuck.
Moving in with Aunty Jill and going on the dole is a much better option. Of course, if you don’t have the luxury of an Aunty Jill, you better get an economics degree and start working your way up the corporate ladder, or else send your champion x-box playing child to join the RAAF, because that’s the only way you’ll ever be able to put an $18 000 present in your Christmas stocking.
| 40 |
| Vote |
Subscribe to this blog
