Now is the time of year when savers get a close-up view of all the money they’re making as a result of high interest rates.
Expect to be surprised when you look at the T5 slips now being sent out by banks and credit unions for the 2023 tax year to document your interest income. Interest paid at today’s levels really adds up. Gone are the days when many people didn’t get a T5 because their interest totalled less than $50.
However much interest you’re making on your bank and credit union savings, it may be possible to earn even more. A small group of alternative banks currently pay 4 to 4.15 per cent, and a larger swathe pay between 3.5 and 4 per cent.
As a personal finance guy, I make it my business to test as many new products as I can. This includes accounts at a few financial institutions offering 4 per cent on savings accounts with no fees. To encourage you try these or other premium-rate savings options, I offer these notes on what it’s like to deal with the three 4-per-cent banks where I have accounts:
Saven Financial: An arm of FirstOntario Credit Union and available to Ontario residents, Saven now pays 4.15 per cent. I haven’t used this account a lot, other than to drop in some money to soak up the high interest rate. Saven’s website is basic but functional – you can transfer money to and from a linked chequing account and send e-transfers. Logging into the website involves an unusual process when you need to open the app on your phone and swipe with your finger.
Motive Financial: This online banking division of Canadian Western Bank offers 4.1 per cent interest and a website that lets you make bill payments as well as e-transfers and transfers of money to and from linked external accounts. I have transferred in a few blocks of money to Motive with zero issues. At 4.1 per cent annually, the interest paid each month is striking. One thing I’d like to see is the ability to open up a few additional accounts and label them for savings goals. EQ Bank does this and it’s really handy for organizing your savings. However, EQ pays only 2.5 per cent right now. The Motive app is just OK, in part because I haven’t’ been able to find a biometric login option.
Wealthsimple: I put $100 into the Wealthsimple Cash account a while ago and have been earning interest at a rate of 4 per cent ever since. There’s a prepaid Mastercard that goes with this account – just transfer cash onto the card using the Wealthsimple app or website, and then use it for payments wherever MasterCard is accepted. I haven’t used the card yet, but I have tried the EQ version and liked it. Both Wealthsimple and EQ do not charge the usual 2.5 per cent foreign transaction fee when you use their cards outside Canada. The Wealthsimple app is smooth to use.
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Rob’s personal finance reading list
The mortgage vs RRSP debate, 2024 edition
A look at the pros and cons of using money to contribute to a registered retirement savings plan or to pay down a mortgage. The ‘peace of mind’ section at the end is important – it points to choosing the mortgage paydown. Five years ago, when interest rates were low, houses were cheaper and the economy was fine, I’d have said RRSP all the way.
Creating financial intimacy
Nine conversation-starters for couples discussing money. Stuff to talk about on the third date and later. In a recent newsletter Q&A, a dating coach said she wouldn’t necessarily recommend bringing up finances on a first or second date. Now, for a look at how much easier it gets to save for a home for a couple as opposed to a single person.
Cheap places to retire in Canada
A website serving a U.S. audience offers a list of the 10 cheapest places to retire in Canada, with rent and grocery prices compared with New York City. I’m not sure they catch the full picture in the cities mentioned, but a fun read nevertheless.
Car rental rundown
A handy guide to your choices when renting a car or SUV, including pros and cons for each. My experience is that prices vary a lot, so check a few companies when you need a vehicle.
Ask Rob
Q: I am considering buying The BMO Money Market ETF (ZMMK-T) for my TFSA account. Will it be insured by Canada Deposit Insurance Corp.?
A: No, CDIC insures bank deposits only. The BMO Money Market Fund holds quality corporate borrowings that mature mainly in 180 days or less and thus present minimal chance of default. Money market funds are not zero risk, but they’re close. Also, right now, money market funds are a smart way to hold cash in an investment account. ZMMK’s yield is around 5 per cent.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
A review of real estate and mortgage apps for homebuyers.
The money-free zone
Singer-songwriter Damien Jurado has a new album out because, of course he does. There have been 20 or so of them in the past 15 years, including two last year. The latest, called Roger’s Edition, is more of the excellent same – folky tunes sung in a soft, high voice that pulls you right into his world of misfits and lost souls. A track I like on the new album is Ready For My Close-up. For Jurado in a louder mode, try an incredible little song called Exit 353.
ICYMI
What I’ve been writing about
- The all-consuming stage of adulthood they never told you about: Looking after aging parents
- What’s the bigger risk to your retirement – cuts to the CPP or declines for stocks and real estate?
- The 2024 Globe and Mail Digital Brokerage Ranking: Who rules, and who’s coming on strong
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You’re not bad at money – you’re suffering from money shame • Retirement might look different for Gen Z and millennials. Here’s how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn't special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada's big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here's how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
Rob Carrick