Make Your Money Work For You Through Interest
Learn how to make your money work for you by utilizing it to earn interest! Making your money work for you through interest income is always the better option than just holding it in cash!
The security and risk profile of interest-paying financial instruments makes it one of the most reliable sources of income. Your money will be safe and on top of that, you will earn a lot more interest than if you were to shove your money in a garbage savings account at a bank!
So, without further ado, let’s get to it! How to make your money work for you with these 5 interest tips!
Like what you’re reading? Check out my other blog posts!
- Looking to earn more interest on your savings account? Click here to find out how!
- Trying to save money? Check out these tips!
- Stop paying interest on your debt! Find out how to get rid of them!
1. Earn More Interest By Switching Over To An Online Bank
If you want one of the best interest rates on your savings then consider switching to online banks! The interest rates at the brick and mortar banks are garbage because they are using your money to make money.
How do banks make money? Banks lend YOUR money out to someone else and charging them a rate that will cover the cost of them borrowing it from you.
That means you will earn 0.05% on your savings while the banks are earning 5% from the same savings! Those sleazy bastards…
If you want to earn more interest, but still want it to be accessible for a rainy day then consider keeping it in an online bank. They are able to pay their customers a lot more interest because they don’t have all the additional expenses associated with a physical branch. Make sure to do your proper research to see if your funds are secured and CDIC insured.
I currently use EQ Bank’s savings account that offers me 2.30% which totally beats the 0.05% I was getting at my main bank!
2. Online Banks Aren’t Your Cup of Tea? Check Out Credit Unions
There are quite a few differences between a credit union and a traditional bank, but the main difference is their intentions. Traditional banks are owned by shareholders whose main desire is to make money.
Credit unions are owned by members with intentions of helping the community by providing everyday banking needs at a more reasonable price.
So if you’re scratching your head and asking yourself “how can I make more interest and make my money work?” then ditch the crappy bank interest rates and head on over to your nearest credit union!
3. Make Your Money Work For You With Guaranteed Investment Certificates (GIC)
Guaranteed Investment Certificates (GIC) are Canadian financial instruments that offer you guaranteed interest plus your principal after a fixed amount of time. The equivalent financial product in the US is called Certificate of Deposits (CDs).
These products will allow you to gain a lot more interest on your savings, but the catch is that your money is locked and you can’t withdraw it until the end of your term. Penalty and loss of interest may apply if withdrawn early.
There are different types of GICs like cashable or redeemable GICs with fixed/variable interest rates. GICs are financial products sold at your bank so do your own research as to which kind your bank offers.
Locking away your emergency fund in a GIC is probably not a good idea. You should only purchase these instruments if you can safely say that you won’t need the money anytime soon.
Do I recommend GICs? I once bought a GIC for a term of 14 months and regretted it because I was only going to gain 2%. Around the same time, I built up the courage to invest in the stock market and guess what? my investment of Suncor generated me a 5% return after a few months! GICs is a good option if you want to be 100% risk-free with a guaranteed interest. Just keep in mind that your returns will be greater than a savings account, but not a lot to brag about.
4. Looking For More Interest? Try Treasury Bills
Treasury Bills is another great way to make extra interest on your savings because you are lending your money out to the government. You buy these investments at a discount and will receive the full principal after the length of the term. These investments are pretty much-guaranteed risk-free because the chances of the government defaulting are pretty much impossible.
These investments can be bought through your financial institution in face values ranging from $1000, $5000, $25,000, and $50,000 with term lengths of 91 days, 182 days and more. Want to learn more about Treasury Bills? Click here!
5. More Interest? Bonds. No, not James Bonds.
Out of all the interest earning tips I gave you, Bonds have the highest earning capability, but also the riskiest.
Bonds are loans given out to either a corporation or government with the expectation to earn interest on top of the principal. These are like I.O.U notes from the borrower to the lender with details stating the full principal to be repaid at a specific date with the variable/fixed interest payments.
There are many different types of bonds, so you can read more about them here!
Bonds will give you the ability to earn a lot more interest than all of the other interest-earning tips in this post, but the risks concerning to bonds is the interest rate risk, call risk, default risk, and inflation risk.
If you’re willing to take on a little risk, but not enough to invest in stocks then bonds could be a good option for you!
How To Make Your Money Work For You Conclusion
These are the 5 ways on how you can earn more interest on your savings. If you are curious on how much you can earn with your current investment and interest rate then use the BMO interest calculator!
I use to stick my savings into a basic savings account at a brick and mortar bank, but quickly looked elsewhere for better alternatives because it turns out my bank was offering only 0.05%! That’s not even half a percent!
Earning interest income generally comes from low-risk instruments, therefore the returns are generally lower than other investment. Also, keep in mind that inflation rates are generally 1-3%, so putting your money to work with these items may not always cover the estimated inflation rate.
I hope you found this blog post useful and let me know what you think down below! What financial instruments are you using to earn more interest?