# Learn how to calculate savings income

One of the oldest and most popular investments in Brazil has been facing difficult times and a lot of competition. The savings account is easy and practical, but leaves much to be desired regarding the profitability delivered to savers. And the culprit for this is the Selic rate! Calm down, we’ll explain why.

In 2017, the Selic, Brazilian basic interest rate, suffered several declines in its percentage, reaching the level of 7% in December. This ended up impacting the savings income, since it is she who determines what is the calculation made to define the return of the book.

To better understand how this relationship happens, you need to know both ways to calculate the booklet yields. The reasoning is as follows:

• 0.5% per month + Referential Rate (TR) – when the Selic rate target is higher than 8.50% per year.
• 70% of the Selic Rate per year + Referential Rate target – when the target is equal to or less than 8.50% per year.

Therefore, knowing that the Selic Rate fell to 7% in December, the second rule for calculating savings income is currently valid. The book yields about 70% of Selic today.

These calculations are the same for all banks. Then you can open an account with Banco do Brasil or Itaú, for example, that the profitability delivered will be the same.

Assuming you deposited \$ 1 million in Savings in early 2017 and left this amount applied over the 12 months of the year. At the end of this period, the yield would be \$ 66,140.90, without discounting inflation. That is, your balance after applying \$ 1 million would be \$ 1,066,140.90.

It may seem like a good result, but if you compare it to the track record and return on other investments, you will be disappointed: your money could be yielding a lot more.

It must be made clear that past returns are no guarantee of future gains. That is, the data presented above only serves to understand how was the return on this investment in recent years. Thus, there is no guarantee of how savings will go forward.

With this information in hand, it is easy to understand that savings are very safe and affordable but inefficient application. It is important to know that there are other investments in the financial market with this same risk profile, but with better returns and therefore can rob all your fans.

## Letters of Credit

The Mortgage Letter (LCI) and the Agribusiness Letter of Credit (LCA) are fixed income investments issued by banks or brokers. When you buy a security of this nature, you are lending money to the financial institution to use in real estate or agricultural financing.

These applications are protected by the Credit Guarantee Fund (FGC). That is, if the financial institution goes through bankruptcy, the investor can get his money back if it meets the conditions set by the institution – be sure to check them out, ok?

In addition to security, another point in common with the passbook is that LCs are exempt from income tax.

## Direct treasure

Treasury Direct is a well-known fixed income financial investment due to its high liquidity and security. This means that if necessary it is possible to redeem the money invested at any time.

You invest in Treasury Direct via brokerage. A bond sold there represents the government’s debt to you, that is, when you invest in the Treasury you are lending resources to the government. After a while your money will be returned along with the interest. But, as we said, if you need to redeem the amount first, redemption is allowed according to the security price on the day.

Also, this bond is as affordable as savings because it accepts investments starting at \$ 30. However, you need to be aware that not all bonds can be purchased for this amount.

## Bankary deposit receipt

The Bank Deposit Certificate (CDB) is an investment issued by banks, which is also protected by the Credit Guarantee Fund (FGC). These titles are becoming increasingly popular and in many cases can offer several benefits.

One is the daily liquidity in most large banks which, like savings and direct treasury, allow the redemption of the amount invested at any time. In medium and small banks the liquidity is not usually daily, but in return, the return is usually much better. The risk of the application is that the bank will not pay you, because the CDB represents a loan that the investor is making to the institution, which commits to repay the amount plus interest after some time.