Young Canadian Investor #5 – Hyping the High-Interest Savings Account
Having some cash handy for emergencies makes a lot of sense given life’s tendency to throw obstacles your way at the most inopportune moments.
The general rule of thumb is 3-6 months of basic expenses in case you fall ill, lose your job, or find yourself saddled with having to repair your car, water heater, leaky roof, etc.
What you may not know, though, is that a savings account at a big Canadian bank will only pay you 0.01% interest per year on your balance. Virtually nothing. This in contrast to online financial institutions like EQ Bank and Wealthsimple that’ll pay you 2.0% and 1.4% respectively as of the time of writing.
On a balance of $5000, a big bank will fork over 50 cents every year, while EQ Bank will pay you $100 per year. That’s 200 times more money. 🎤 ⬇️
Remember that money you make off interest is taxed as income, so you need to account for it when you file your taxes.
Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.