Illustrate the inefficiencies inherent with the pay cash strategy. |
There are problems with paying cash? What could they be? Well let's take a look. To pay cash, you first need to save, you have to fill the tank. As you fill the tank, the government may require you to pay taxes on the growth. Once you get the tank full, meaning you have enough money in the tank to make your purchase, then what happens? You've got to drain the tank to make the purchase. What happens to compounding? Paying cash is not bad, but it's not the most efficient. Remember, you lose the interest you would have earned had you not drained the tank. People who pay cash say they are saving interest - and they do, however they are losing the interest that is no longer being earned on the money they had in the tank. It's a defensive strategy. |
No math presented on this screen. |