After Steve Jobs promoted his iThings as innovations, every marketer out there has been touting his wares as ‘innovations’. It is as if each one of them had invented the lightbulb! Anything new is an innovation, nothing less. Everyone is an innovator. Everyone is engaged in innovation. If someone takes a dump, it is also an innovation. The bar has gone down the toilet. Thank you, Steve.
Recently, I had a brainwave. (Note how modest and humble I am.) Yeah, it happens occasionally. This one was about a financial product that I think can add greatly to the wealth of a country.
What is a no-withdrawals account (NWA)
NWAs are a figment of my imagination. In that la-la land, an NWA is like
- a fixed (term) deposit but the amount is not fixed.
- a savings account but you cannot withdraw the deposited money.
A no-withdrawals account is a special bank account in which the account holder can only withdraw the accrued interest once a month. If the latest dollop of interest is not promptly withdrawn within 30 days, it gets reinvested and compounded.
That is, deposits into the account and any reinvested interest can never be withdrawn.
If an account holder withdraws the interest every month, then he gets a regular income. If not, his savings in the NWA grows over time. When the account holder dies, the bank transfers the funds to the NWA of his nominee. (The nominee must also have an NWA. Otherwise, it increases the chances of the account holder dying an unnatural death.)
A parent, guardian or any benefactor should be able to create a NWA for a child and deposit any amount of money in it over time. The deposited money earns interest and the interest it accrues is reinvested until the child (the account holder) becomes a major. This will ensure that the new adult will have adequate money to cover his expenses when he ventures into the world as an adult.
A grownup obviously should be allowed to open and operate his own NWA. He would not be able to withdraw the money he had deposited before. However, he will be able to withdraw monthly interest from the account at the end of every month.
If NWAs (by statute definition) are protected from attachment or garnishing, it will add to the public's trust in this ‘innovative’ financial product.
Benefits of no-withdrawals accounts
The funds in an NWA can only grow. It will never go down. It will provide a steady income to the account holder over his lifetime and to his descendants (or nominees).
The deposits in NWAs will offer banks with funds that are even more cheaper than CASAs, as there is no chance of the money ever leaving the bank. Of course, the account holder should be free to move his NWA to any other bank of his choice. (All contracts must have an exit clause.) Only then, the bank loses the money.
NWAs will benefit banks, borrowers and savers. It will provide a strong foundation to the banking system and the larger economy. Only losers would be the globalist kleptocracy who clamour for negative, zero or low interest rates.
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