When making purchases or acquiring services from others, it is not unusual to have situations where you can say pre-pay for an entire two years worth of service ahead of time. I guess we do it mostly for convenience, but you may be surprised at just how much money we can also lose as a result of doing so.
The most common items for this is buying extra insurance/warranty for a product where you pay say $500 upfront for an extra four years of coverage on your product. If you think about it from a business perspective, what usually happens in those scenarios is that it is actually true many times where if they end up having to honor say a replacement that it does actually cost them more money than what you paid. However, the real benefit is that by everyone giving them that much money in the meantime, they can then use that money to re-invest in something else. Basically, by the time you redeem your $500 worth of service they have already turned the original funds into say $1000. The most simplistic example would be keeping everyone’s fund in a high interest account and getting basically free money that way.
When it comes to making deposits, a lot of times it does make sense to do so such as having to give a retainer for certain professional services that are required on sudden demand or say a damage deposit. At the same time, a lot of people use an extraordinarily high figure because similar to the above they will re-invest your money in some way to generate more money. So if you think about it, doesn’t it make sense for you to try and maximize your own money to try and generate as much extra income as possible for yourself?
Now obviously you will need to do your own research as everything is on a case by case basis such as maybe having to do less paper work may justify the time and cost in doing so. But in general, always think about the amount of money you are giving up at once as a lot of individuals and companies are making a lot of money everyday with the money that you give them to keep. Wouldn’t hurt for you to also become savvy in maximizing your own money for your benefit as well.