Saving Plan with High Cash Rebate: Saving while Spending

Fifi spared a portion of her earnings to a savings account every year for future traveling. She is thus guaranteed to be refunded 55% of her first year’s principal by the end of the second year through this account. She can travel afar on her own, or take her parents to spend their holiday in a foreign country nearby without being too concerned for the expenses.

 

Suppose Fifi wants to take a long break to visit Europe for one month, in case $55,000 is far from sufficient, she can suspend from withdrawing for one year and wait for the second year to withdraw altogether. The principal amount in her account can generate a return of 5%, much higher than the bank interest rate. In addition to traveling, Fifi can also use her annual cash rebate for educational and mortgage repayment purposes. When her account is closed, Fifi can still withdraw almost all the principal amount deposited throughout the year.


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