I have a really quick and easy episode for you, because well, this little finance tip actually IS this easy, and it only takes a few minutes to explain. So, if you want to learn one quick and easy change you can make to get your bank account earning you 100x more money than it is right now, then keep on reading!
How to make 100x more money by switching to the right bank account.
So, as gimmicky as that title may sound, ‘how to make 100x more money by switching to the right bank account’ this is one of the few areas of personal finance advice that is not in fact too good to be true. You can earn more money simply by switching to a type of account called a High Interest Savings Account, you’ll often see this referred to as a HISA. Later in this episode I’m going to walk you though exactly how this weeks, but first let me back up a minute.
How much interest are you earning with your current bank account?
If you’re the type of person who is watching this episode, chances are you already have online bank accounts, and you know how to use your online banking portal. Now maybe you have a chequing account, maybe you have a savings account, maybe you even have what’s called a high interest savings account with your current bank. Chances are, in any of these accounts that you’re earning 0.05% interest maximum right now. That’s such a teeny tiny interest rate that, you might not even notice that you’re making any money at all with your bank account.
Most bank accounts with well known big bank names are currently offering interest rates of around 0.05% right now at the high end of their rates, most other accounts are hovering around 0.01%. Check out your bank accounts and see what the interest rate you’re earning is, it’s probably 0.01%.
And the funny thing, at least to any older members of this audience, is that these are considered high interest rates by the banks at the moment, AND these accounts often have fees associated with them like $5.00 every time you want to make a transaction, that quickly eat into any interest earnings you could possibly be making with that account.
What better interest rates are available?
On the other hand, you can find banks with online only accounts that offer interest rates as high as 1.5%. When I opened my account with EQ bank, I was getting 1.5%, when I was writing this episode I logged on and their basic high interest savings accounts are currently offering 1.25%, which is still really good.
This means you can open a bank account today, with an interest rate that’s 125x higher than what you’re currently earning. Many of these accounts have no transaction fees, and they have no account minimums, which means you can put $100.00 in today and start earning interest on your money, whereas lots of other accounts have account minimums that require you to have $5000 in the account before you start earning any interest on it. That’s great if you have $5,000.00, but if you’re still building up to that you’ll definitely get there just that little bit faster if you start earning more interest in your account.
So what should you use a high interest savings account for?
Now we’re not talking huge sums of money here, and this definitely is not your retirement plan, but these high interest accounts are the perfect place to store any large chunks of cash savings that you’re collecting and that will be staying put for a while. For example, saving for a down payment on your home, OR, if you’ve listened to many of my other episodes, you’ll know that I recommend these high interest savings accounts as the perfect place to keep your emergency fund. If you don’t have an emergency fund, make sure you go and watch this episode all about saving for your emergency fund, because you need to start one if you haven’t yet. That is personal finance step number 1.
When it comes to your emergency fund, It’s best to keep it in a separate account, and preferably somewhere you won’t necessarily see it all the time and feel tempted by it, like in a high interest savings account with another bank. AND because the goal of an emergency fund is that you have a chunk of money sitting there in cash that you’re not touching for long periods of time, you might as well put it to work earning at least a little bit of interest for you.
So how much can you earn by keeping your emergency fund in a high yield savings account?
I have an emergency fund in a high interest account, and it’s currently earning around $70.00 a month. That’s an extra $70.00 a month that I have to do nothing for, that it’s topping itself up with without fail, and that’s pretty great. Again, not a huge sum of money, but for the 3 minutes of effort it took me to open the account and transfer the money in, it’s kind of one of those no-brainers. Three minutes to open an account, transfer my emergency fund into there maybe took another minute, and then I started earning around $70.00 a month, every month, since then. And I can still access that money at any time, no fuss, no questions asked, it’s just like a regular savings account.
When should you NOT use a high interest savings account?
Now there are occasionally times when it doesn’t make sense to keep your money in a high interest savings account, and this depends on the individual rules of each different account offered by each different bank. And these are changing all the time so you just have to do your research. Some have withdrawal fees, some will drop you down to a lower interest rate if you take the money out before a certain date, things like that. And it’s up to you to read and understand the requirements for the account that you’re opening.
Now the how to adult school is always trying to provide you with the best and most up to date resources, so one of the things that you can always find over on the website, is a summary of the 1 or 2 best high interests savings accounts that are currently available in Canada right now. We always keep that updated, so you can always check back there to see what’s available if you want to open one up.
Also, I currently have a small promotion link for you running with EQ bank at the moment. For the first few people who use the link found here to sign up and open their own high interest savings account with EQ bank, it’ll drop an extra $20.00 into your account as a welcome bonus. You just have to use the link I provided in the description to sign up, and put your first $100.00 into the account right away. This link will be changed and updated over time as the accounts change and grow and better accounts come available, so you can always check back to the resources library page and see what we’re recommending.
Want to learn more? Check out the resources below!
Want to take the next step in your financial journey? Grab one of my free resources to start making moves with your money:
3-Day Personal Finance Challenge: Break up with broke and start building financial confidence https://howtoadultschool.com/personal-finance-challenge-download-page
First-Time Home Buyer’s Guide: Everything you need to know before buying your first home https://howtoadultschool.com/first-time-home-buyers-download-page
Expense Tracker: Finally feel in control of your spending with this easy-to-use tracker https://howtoadultschool.com/expense-tracker-download-page
My favourite personal finance tools:
Wealthsimple (High Interest Savings, Investing & TFSA/RRSPs): My favourite platform for personal banking AND investing wealthsimple.com/invite/OB9NB7
EQ Bank (High-Interest Savings Account): Another great option for high interest savings accounts (for Canadians) join.eqbank.ca/?code=CORYNN4617
Ready to get serious about mastering your finances?
Financial Foundations Course: Learn every personal finance skill we all *should* have been taught in school. https://howtoadultschool.com/financial-foundations-course
Investing Essentials Course: Learn to invest with confidence and grow your wealth https://howtoadultschool.com/investing-essentials-course
Group Coaching Subscription: Get expert guidance and support every month https://howtoadultschool.com/group-coaching-program
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