Calculating the cost of ATM fees. If a person has ATM fees each month of $16 for 7 years
The correct answer and explanation is:
Correct Answer:
To calculate the total cost of ATM fees over 7 years, if a person pays $16 per month: Total cost=Monthly fee×Months per year×Number of years\text{Total cost} = \text{Monthly fee} \times \text{Months per year} \times \text{Number of years} Total cost=16×12×7=1,344\text{Total cost} = 16 \times 12 \times 7 = 1,344
Total ATM fees over 7 years = $1,344
Explanation:
ATM fees can quietly add up over time, especially when they occur regularly. When a person pays $16 each month in ATM charges, that may seem small in the short term. However, over an extended period, this recurring fee accumulates into a significant cost.
To determine how much the person spends over 7 years, we first calculate how many months are in that time frame. Since each year has 12 months, 7 years equals 84 months. By multiplying the monthly fee of $16 by 84 months, the result is $1,344. This is the total amount the individual will pay in ATM fees alone during that 7-year span.
This calculation highlights the long-term impact of recurring costs. Monthly fees, even if they seem minor, can lead to large expenses over time. It emphasizes the importance of being aware of such costs and considering alternatives. For example, switching to a bank that offers fee-free ATM access or reimburses ATM charges could result in significant savings.
This example also encourages better financial habits. People are often surprised when they total up routine expenses like ATM fees, coffee purchases, or subscriptions. By identifying these charges and adjusting spending habits, individuals can redirect money toward savings, investments, or more valuable needs. Understanding the full cost of recurring expenses like ATM fees is a crucial step in effective personal financial planning.