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Home >> Manage Your Money >> Personal Finance
Pay Ahead for a Discount, or Bank My Money
If I'm paying $125 a year to store something, would it be better to prepay for twenty-five years at $2,300 or put that money in the bank and let it acquire intrest and pay the $125 a year.
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 If you pay $125 per year for twnety-five years your expense is $3,125. If you pay $2,300 now, you will save $825. If this $2,300 were banked and was expected to be worth $3,125 in 25 years, your interest rate of return would be 1.23%.
The unknown parts of this equation are:
- Can you do better than 1.23% on interest? Most likely you can.
- What will interest rates be like a year from now, 5, 10, 15 or 20? Nobody knows.
- Will this business be there in 25 years? Will you need their services all that time?
Published on BankingQuestions.com 3/09/07
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