It can be overwhelming figuring out where to best put our money due to the sheer amount of options available to us – competing banks with each of their incentives, sock drawers, vaults, investments accounts etc.
I was 14 years old when I opened my first bank account (at the same time I landed my first job). My mom took me to CIBC to open my first account. It just made sense to bank with the same one my parents were using back then and I didn’t have to worry about fees because there were no bank fees on Youth or Student accounts.
Fast forward 10 years (wow, that’s a whole decade! I’m having a moment here…) and things are a little bit different. I’ve done more research into where to best keep my money now. FYI – NOT in my sock drawer!
Many of you have asked what my recommendations are for best accounts to keep your money in. To be honest, I don’t know the answer to the “best bank account” out there. But! I CAN share with you which ones I use and how I use them – these would be my “recommendations”.
I’ll break these down into daily banking, short-term and long-term goals – for simplicity’s sake. It helps that you make financial goals with timelines because this helps you determine where to best keep your money. I’ll share with you my goals so you can see how this works out.
Where I Keep My Money – Canadian Bank Accounts I Use
I used CIBC and then ATB for daily banking while I was a student – no fees! I chose these banks because my parents were banking with them at the time.
When I graduated, I lost the student account and switched to President’s Choice Financial. At the time, they were the only bank I knew of that didn’t charge fees or asked for a minimum amount stored in the account for them to waive fees. In their checking account, my money was earning 0.05% interest rate.
This was better than 0% which is how much some people are still earning for storing their money with their banks. I’m still appalled at how many people are keeping their money banked in an account that doesn’t earn them interest when there are institutions out there that offer it to you! (for free even!)
I’m even more appalled at people willingly paying their banks so they can use their own money… how ridiculous does that sound?
I recently switched to Tangerine for my daily banking… and I absolutely LOVE them! As of this post, their checking account gives you 0.25% in interest (a 500% increase from PC). Again there are no fees for having an account with them and no minimum balance required. The downside is that there is only one brick-and-mortar Tangerine café in Downtown Calgary – so if you need to see a representative in person, it’s quite inconvenient if you don’t live near that location. Most of their banking is done online – which I don’t think is a downside at all and hasn’t bothered me enough to leave Tangerine.
(Shameless promotion here! Use my Tangerine Key 44760223S1 to sign up as a new customer and we both get $50 each! Seriously, would you say no to free money?)
1. House Down Payment (1-3 years)
This is sitting in a Registered Retirement Savings Plan (RRSP). I’m using the Home Buyer’s Plan for the down payment on our first home. We do not want to put this money in risky investments due to the timeline on it being so short – so it’s essentially just sitting in a savings account.
2. Emergency Fund (for when the unexpected happens)
This is in a Tax Free Savings Account (TFSA). It is invested in a conservative portfolio (70% income funds / 30% equities). This is where I deviate from the norm.
I usually would recommend stashing an emergency fund in a savings account only – but we decided we could bear with this level of risk for this account. Since we are currently not paying for mortgage or rent, we have been able to cover emergencies with our monthly incomes.
Thankfully the only emergencies that have come up are car repairs. Even while my partner wasn’t working, we were able to cover all our expenses with my income and his employment insurance alone.
However, if money is tight, put your emergency fund in a savings account only! (May I recommend EQ Bank below? 😉 )
3. Travel, CFP Courses & Other Short Term Goals
EQ Bank for these money goals! I heard about this account just last month via money nerds on Twitter and I signed up ASAP. They offer 2% interest rate on a savings account (per Ratehub, they offer the highest interest savings account around).
This is the perfect place to stash cash for some of my 2016 goals and for money I don’t know what to do with yet! And they also have a savings goal option where you can plug-in how much you want to save and by when – it conveniently shows you your progress every time you log on to check your accounts!
This would be my only long-term goal as of now. Note that when I say “retirement”, it doesn’t necessarily mean at 65 years of age. I’m aiming to become financially independent long before 65. My partner and I are working on building the nest egg for us to retire on however we’ll see how it goes as time goes by!
Group RRSP – After we withdraw $25,000 from my RRSP, we will need to repay this back. I’m planning to pay this loan back into my work group RRSP (which is currently invested in an aggressive growth portfolio and has reasonable management fees). The other bonus is that my employer will match up to 2% of my contributions.
Work Pension – I’m paying into a defined benefit pension plan from work as well. With my contributions to my pension, I’m scaling back on RRSP contributions (except to get that maximum 2% matching) and concentrating on maxing out my TFSA first.
Portfolio IQ by Questrade – I heard about robo-advisors last year but was apprehensive about moving my “retirement money” from a big bank. Well, I made the move a few months ago and so far, so good. My “retirement money” is invested in an ETF (exchange traded fund) with Portfolio IQ which is a portfolio that provides good diversification with lower management fees. This means I don’t have to pick individual stocks to create my portfolio and worry about when to sell or buy each one, plus all the icky research that go into making smart trades – it’s being done for me by the portfolio managers for a smaller fee than big banks or financial advisors would.
I’m raving about robo-advisors now because of the lower management fees they charge. I didn’t realize how much management expense ratios were eating up into my “nest egg” until I did my research and was appalled.
Prior to moving my “retirement fund”, the mutual fund it was growing in was charging me about 2.2% in fees. I thought it was peanuts… but when I calculated that on my $25,000 balance – that’s $560 gone every year!
If you’re a young person who wants to grow your money, one of the biggest factors that makes a huge impact is how much you’re paying for in fees. If you think the higher fees = better investment decisions by your bank or financial advisor, you’re wrong. Concentrate instead on keeping as much of your money invested instead of losing them on fees!
As of now, this mix of accounts I’m using works really well with my goals and my current financial situation. I’m sure as this changes, some of these accounts may or may not change.
What you can take away from this:
I wrote this for you because I get asked a lot what’s the best bank account to keep your money in. While I can’t answer that specific question for you, I do share what I use as ‘recommendations’.
The other reason is to make a point – that if you’re still using accounts that charge you for using your own money when some of the accounts I mentioned pay you money instead, you need to switch today. Don’t get attached to your current provider – it’s about being smart with your money.
To make organizing your finances easier, it helps to create short and long term goals as well. With this, you’ll know how much sooner (or later) you’ll need your money so you can decide which account to best keep it in and give your money the best chance to grow and compound.
Disclaimer: I recommend you do your own research into these accounts before opening any of them. The opinions above are my own and not influenced by any of the institutions I mentioned – I simply love these products and have received great service from the providers. You should read and understand the fine print. For some “no fee accounts”, there may still be fees for things like email transfers, overdraft protection, etc. Understand for yourself and make decisions based on your research.
Where do YOU keep your money? Do you have products you would recommend? Share your thoughts in the comments section below!