By Jaime Woo

People work hard for their money, but don’t make their money work hard for them. It’s time to fix that. The last Wednesday of every month, Economist—formerly Saverist—whips your income into shape with smart, practical advice.

Photo by Swilton from the Torontoist Flickr Pool.
The simplest (and least risky) way of saving money is to put it in the bank. Not only is it a safeguard against rising inflation rates, but balances up to $100,000 are insured by the CDIC—benefits money stuffed under a mattress doesn’t provide. Here’s how to bank your money smartly.

Minimize Fees

People hate fees. Luckily, there are plenty of virtual (read: branchless) banks that provide high interest with little to no fees. The most convenient is probably President’s Choice Financial, which allows banking online and by telephone, and transactions through CIBC ABMs at no extra cost. For those who still prefer face-to-face service but don’t need fancy extras, there are accounts that will waive the monthly fee if you keep a minimum balance, like the Scotiabank Powerchequing Account or any TD Canada Trust chequing account.
Remember to do a quick estimate of the balance you expect to keep in the account and then compare it to the interest you’d get in a high-interest savings account. (Most banks offer 2.25%.) For example, the Value Plus account at TD Canada Trust waives the monthly fee of $8.95 for a minimum balance of $2,000. The fees for the year would be over $100, or 5% of the balance, so your $2,000 would work harder getting the fees waived than in a high-interest savings account.
(Considering that you’ll have to pay tax on your interest, it’s also worth noting that for our sample situation, you’d have to have $6,000 in your high-interest savings account to earn as much interest as you’d pay in fees for the Value Plus.)

Gimme Gimme Gimme

Another tactic used by the banks in lieu of fee-free accounts is to offer free gimmes for signing up. CIBC is handing out 15,000 Aeroplan Miles and Royal Bank is giving out free Eee laptops. The only catch—and you knew there was one, right?—is that you’ll have to sign up for an account that charges fees to the tune of over $150 a year, albeit one decked-out with unlimited transactions.
Of the two, we’d prefer the Aeroplan Miles, which are more flexible to use, especially if you’re already an Aeroplan member. The Eee might appeal to people who aren’t already saddled with a Blackberry or iPhone. Royal Bank is handing out the most bare-bones version, the 2GB Surf, so first check out the other models, like the 4GB version or the new 900 to see which one fits your needs best.

Make Every Cent Work For You

The first rule of thumb for people with mortgages is to pay the mortgage off as soon as possible to reduce the amount of interest accumulating on the principal. Canadian Tire’s One-and-Only and Manulife’s One are now making it easier by providing mortgages that allow Canadians to consolidate their debts and assets into a single account.
The easiest way to think about it is that your new consolidated account would function like a giant credit line: you can deposit and withdraw money as necessary. Except, now, money that previously sat in separate bank accounts earning almost nothing is used against your mortgage, saving you interest costs down the line. There’s the added benefit that, since the interest rate on mortgages is lower than most credit cards and credit lines, debts can be transferred over to the mortgage to take advantage of the better rate. Pretty one-derful, no?