Today I was talking to a person where it seemed like she will potentially have about a spare $100,000 as she has decided to downsize things like her housing. Of course this brought up questions such as what one would do with that extra money. It kind of made me think of that thought where if that amount is enough for a person to potentially get a lot of interest from a bank where they can simply live off of that.
Of course that is highly unlikely with a regular savings account. I remember when I was a kid I had this thought where all you would need is to save up $100,000 and from there your money could keep growing in a bank to the point where you don’t really need to work. This was based on the misconception of interest rates as I always saw banks advertising things like one or two percent interest that is paid out monthly. Basically, that is an annual rate that is paid out monthly as opposed to you getting like one to two percent of your funds each month.
I think for most they would probably need like $500,000+ and that is assuming the person is extremely frugal with a ton of stuff covered already as two percent of that is only about $10,000. Of course as time has passed I think it’s better to invest it in something if you have that much excess funds. Example, I would think investing in a property and renting it out would be a little more fruitful. Either way, I guess the thought of living off interest was a good way to get me to save early and not wanting to just spend my money on anything.