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My fucking bank...
Minus_83
Registered User, __BANNED USERS regular
Registered User, __BANNED USERS regular
So, I have recently began working steadily for the first time in awhile. I need savings account recommendations / explanations on how the fuck they work.
I am in Canada, so advice specifically concerning our banks would be great, but in general, lets just assume that I dont know shit about money.
I get paid every two weeks, my cheques are deposited directly into my current account, and all told within a month after covering my expenses ive got about a grand to work with (after taxes), and I want to know what I should do with it aside from blowing it on random movies and video game shit.
Im looking for a savings account that will accrue decent interest, also, I dont know how interest works really, some say monthly, some say annually, its all new to me, id kind of like something where each month I can just plop X ammount of dollars into the account and just have it build and collect interest.
My current bank offers a savings account with something like 0.25 interest i think, hang on...
They have a "Power Savings Account" that gives you 1.350% on anything above 5K, which of course I dont have, but could build up to it, how is the interest calculated? Would it just be 5,000 x 1.350?
IDGI
Any Canadians have like a high interest savings account that is really good? its confusing to me.
I am in Canada, so advice specifically concerning our banks would be great, but in general, lets just assume that I dont know shit about money.
I get paid every two weeks, my cheques are deposited directly into my current account, and all told within a month after covering my expenses ive got about a grand to work with (after taxes), and I want to know what I should do with it aside from blowing it on random movies and video game shit.
Im looking for a savings account that will accrue decent interest, also, I dont know how interest works really, some say monthly, some say annually, its all new to me, id kind of like something where each month I can just plop X ammount of dollars into the account and just have it build and collect interest.
My current bank offers a savings account with something like 0.25 interest i think, hang on...
They have a "Power Savings Account" that gives you 1.350% on anything above 5K, which of course I dont have, but could build up to it, how is the interest calculated? Would it just be 5,000 x 1.350?
IDGI
Any Canadians have like a high interest savings account that is really good? its confusing to me.
Minus_83 on
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Posts
That being said, focus on saving up about 6 months of living expenses, first. Then, start looking at where to stick your "extra" money. Does your job offer any sort of retirement account? Something tax-deferred? You should look into that, too.
At 0.25% interest, over a year you'll earn $2.50 for every $1000 you have in the account ($1000 x 1.0025). If you are charged any fees, you're now negative monies. Of course the safety of it being in a bank, etc etc.
You could put your money in a term deposit to earn a bit more interest, but then generally you can't touch the cash. Or if you do, you lose all interest accrued.
If your bank is at all decent you could go there and talk to someone and ask about all their money-making products.
This man always speaks the truth. For the love of all that is valuable save up six months of income that you could access in relatively short period of time if the need were to arise.
The key to all of this is that it is not a sprint, but a marathon to setup yourself up for when you are old and wise. You already have an account with a bank, go talk to them about your future if you can find the time.
Take the time to scare yourself: Given your current salary, say you want that when you retire, add a zero to it. Stare at that number for a moment. That is the number you need to reach by the time you want to stop working. Divide it by 40. That is how much you now need to put away/accrue each year to get there. Good luck. Yeah, I'm scared too.
I dont like talking to my bank guys, I dont really trust them, like if there were some magical account at some other place that suited me better I highly doubt theyre gonna be the ones to tell me about it.
Once you've got that set, that's when you start looking at what to do with the rest of your money. Though, like I said, talk to the HR department at your job, and see what sort of retirement options they have for you; if you're getting any sort of a match from your company for tax-deductible or tax-deferred retirement savings, you should be taking advantage of that.
It's a decent compromise on the "immediately available" criterion, too. Since ING is an internet bank I have my ING savings linked to my Wells Fargo checking. A transfer in either direction takes about 3 business days so the balance is still pretty liquid and the 1% I get there beats the hell out of the .02% Wells Fargo has on my mandated savings account through them.
Good luck.
You are going to want a savings account, because of the interest and because you will be able to see the amounts more clearly. However, a ton of banks here have minimum requirements to not be charged fees on your savings account. I highly recommend being really cautious with the fine print, if you don't meet the minimum to not be charged fees, don't get the account (yet). See if your bank has a savings account that doesn't have a minimum or at least make sure the fees aren't going to impact your savings at all.
Real quick - Coast Capital Savings (Vancouver/Island only credit union) have free checking and a no-minimum savings account with the same interest you were quoting in your OP. I don't know if you happen to be in Van but if you are, they are a great option. I have had a few friends that are just moving here or short on cash use them and it is really good not to be dinged with fees all the time. They are small but they are a great credit union, and as long as you have a branch / ATM that you will use and is close to your regular route, no problem that they aren't a huge bank.
You want to take 5% (minimum, up to 10%) of your income and apply it to savings. This would be in a savings account, and you can first use it to save your 6 months emergency fund. If you can afford 10% of your $1000 after tax then do 10%.
Once you have about $2000, even a shitty bank like Scotiabank is going to allow you to get a much nicer savings account, probably, because you can meet the minimum on some of their savings accounts. You can go online to your bank, or stop in to grab their booklet that outlines all the fine print. Find the best rate you can afford (based on the minimum requirement) and get that savings account.
So once you've applied the minimum, then save your emergency fund.
After you've saved your emergency fund, you would be able to apply the next $5000 to your tax free savings account offered to Canadians. Once you have $5000 saved (on top of your minimum and your emergency), go to the bank and open your Tax Free Savings Account. Then transfer just the $5k into that.
Lastly, since it seems from your post that you want a long term plan - assuming you've done all the above and still have overage savings (beyond your min+emergency) in your savings account, that is when you can consider applying the overage into a fixed term, higher interest account. What it does is take your overage that you want to get a higher return on, locks it away for a fixed amount of time, I think Scotia offers 3 months at shortest and like years as the max, and gives you more interest on it. You can't access that money in that time, it is locked away, but in return you get much higher interest.
Or stolen, or whatever. Don't count on it as a real investment.
but they're listening to every word I say
The best Canadian bank is the one where you have a relationship with your bankers. If you don't like/trust your bankers, go to another bank and see if you like/trust who your banker there is.
You should only be keeping your money in a savings account if your timeframe is <1 year. If greater, start investing. Open a Tax Free Savings Account and plop your money into something. Cash will, at best, get you around 1.5%, which is peanuts, and below inflation. You are actually losing money by doing that.
TFSA is a misnomer, btw. Should be Tax Free Investment Account. Cash is for chumps.
Investment wise, GIC rates are still in the pits, so fixed income mutual funds are your friend for low-to-mid risk investments. If you got a long timeframe (more than 5 years) start looking at equity funds. Given the unstable nature of the market as of late, more or less anything can happen in an equity mutual fund; the stock market is a fickle mistress. Hence, you better be comfortable waiting a couple years to make such a investment.
I'd ahve to know more about your situation/goals to give you better advice.
Also, if:
a) you make a lot of money (more than 37k, more the merrier)
b) have a long-term savings plan (retirement/home purchase/going to school)
c) have cash to spare
Then go open a RSP, like right now. Tomorrow is the deadline for 2010 tax claims, so get on it.
Lastly, if you need advice, call up your bank and make an appointment, times are crazy right now due to the aformentioned RSP deadline. Bankers are paid to give you advice; go make us do our job :P.
This is what I came to say. All of my information will be about CIBC because that is the bank I use (other banks probably offer similar accounts although the details may be different). Even excluding the tax free benefits a CIBC Tax Free Savings Account earns interest at %1.250 annually (paid monthly) which is better than any of their other savings accounts excluding their eAdvantage Savings Account which is an online only account. When your balance is above $5000 eAdvantage Savings Account would give 1.35% annually, if it is below 5000 you earn %0. For a CIBC Tax Free Savings Account there are no fees unless you transfer all or part of your TFSA funds to another financial institution, in which case a $100 fee will apply. CIBC has some pretty good videos explaining the basics of a TFSA here although they are shy on specifics especially about rates and terms (proably so that they can use the videos when they change rates in the future). The main drawback I have seen is that it can only take a maximum of $5000 a year deposits. I'm not really specifically endorsing CIBC just that is the information I know because I use them.
A TFSA is also pointless if you're savings cash, since on $5000, you sucessfully save $75 from taxation at 1.5%. That's like $20 in tax savings, if you earn 40-50K. Less if you don't. If you aren't investing your moeny, you won't be taking advantage of the raison d'etre of the TFSA.
That's why I don't think talking about investment accounts and how "savings accounts are for idiots" is really the best start. I think the OP needs some short term advice to start.
2) Start saving up money and start studying how to invest. A good place is the Canadian Couch Potato.
3) Once you have enough money saved away as an emergency fund, start investing your money somewhere. I suggest opening a TFSA at a discount brokerage like Questrade and investing in ETFs. Follow the couch potato strategy for simple low cost investing.
4) Once you outgrow the TFSA, you should look into starting RSPs or plain old investment accounts.
You need to do some reading to make sure you know what's going on,
but managing your own money in an intelligent fashion is the best way to go.