Get paid to spend
Derek Shevkenek - Oct 31, 2022
In the 1970’s when I was a kid, my mom brought me to open my first savings account. In there I could squirrel away revenue from lemonade stand sales, proceeds from collecting cases of empty beer bottles from apartment buildings, and profit from the rental fees I charged my sisters for reading my comic digests. (I thought that last one was a great idea at the time!)
Back then, savings deposits earned around 7% interest per year. At that rate, after 10 years a $1,000 deposit could grow to become almost $2,000. These days, interest rates on bank deposits are at or close to zero. Assuming an interest rate of 0.3%, a $1,000 deposit will earn you just over $30 after 10 years. At this rate, it would take 230 years to grow to $2,000!
Get paid to spend
It’s time to turn the tables. Since you’re not getting paid to save, get paid to spend. Get a cash back credit card and use it for all your usual expenses and purchases.
But this will only work if you’re already one of those people that faithfully pays your credit card to zero each month to avoid interest charges. Or, you currently use a debit card for spending without dipping into lines of credit to cover the bills.
As an example, my wife and I use a cash back credit card paying 1.75% on all spending. Some cards offer a bit more and some quite a bit less. Most cash back cards do have an annual fee, but between the cash back and other benefits usually included, the fee is relatively minor. We used to have a travel rewards credit card, but for our family of eight, cash is more flexible than travel.
Get paid how much?
At 1.75%, if you’re spending $2,500 per month, you’d get $525 back in cash per year. $3,500 of monthly spending results in $735 cash back, and $5,000 in monthly spending yields $1,050 cash back per year.
Look into getting a cash back credit card and get paid to spend.
Inquiry welcome at www.dereks.ca. Opinions are those of Derek Shevkenek and may not reflect those of BMO Nesbitt Burns Inc. The information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. BMO Nesbitt Burns Inc. is a Member - Canadian Investor Protection Fund. Member of the Investment Industry Regulatory Organization of Canada.