Save Money, Keep Your Cash

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Everyone knows that bills come every month without fail. It follows to reason, then, that the fewer bills a person has to pay, the more money he should have in his pocket. Unfortunately, many people can't resist the temptation to buy one more subscription to a magazine, or make a large purchase such as a car or boat.

When a salesman and a buyer meet, the salesman normally has the advantage that he and the organization backing him are specialists in the items being sold, and (he terms thereon, whereas the buyer is a greenhorn.) The more complicated the terms of sale, the greater the salesman's advantage. In arranging for "convenient, easy payments," a buyer forgets the total cost, his attention being diverted to the size of a single payment. A salesman inclined to be tricky obviously has more opportunity in the complications of installment contracts. So the total amount paid by an installment buyer is apt to be much larger than the cash price of what he set out to buy.

The prices, called premiums, on life insurance are handy to use as an example of installment buying, because a large insurance company's charges are the same throughout the United States and Canada, whereas on most other items the charge probably varies from store-to-store in the same town.

Suppose a young man who is 25, is buying a life-insurance policy of the "whole life" type, with a death value of $5,000. This policy is partly an investment, but that has nothing to do with the point being discussed here. Paid once a year, in advance, the premium is $92.10. Or he can pay $9.35 a month, which adds up to $112.20 a year, $20.10 more than the single annual premium. Paying by the week is far and away the most expensive; the weekly premiums, $2.75, amount to $143.00 a year.

These premiums are those quoted in 1956 by one of the largest companies. They apply to policies that technically are different, but essentially they are alike. The policy with the annual premium of $92.10 is not offered with a monthly premium, and neither this policy nor the one with a monthly premium of $9.35 is offered with a weekly premium. It appears that the company offers separate policies primarily as an excuse for increasing the extra charge for more frequent and smaller premium payments.

Car insurance companies offer the same kinds of price differentials, and it is always smarter to part with more money up front and save yourself in the long run. Sometimes the savings can be significant: up to $200 or more. Make the smart choice and pay for premiums on the cheapest long-term plan available, usually the annual plan. It might hurt this month, but you'll be patting yourself on the back next time.

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