Wealth Must be Learned

As Jim Rohn once said, when talking about his younger self: "I never knew wealth was a study".

It truly is.


I used to believe that being frugal, and having inexpensive bills, would help me get ahead in the money game. I didn't have many hobbies, and I was able to easily delay gratification. I was great at hunting for a deal on products and services, and had no qualms about refusing to purchase something if I felt the price was too high.

With all this, I trusted that as long as I kept putting a good chunk of my monthly income into my bank's "savings" account, I'd be doing pretty good. After all, you gain INTEREST on your money when you put it into your savings account. Plus, with all the articles I'd seen showcasing how most people are either in debt, live paycheck to paycheck, or have zero retirement savings, I felt I was doing especially well.

But what was I saving for?

At that point in my life, I didn't really know. For retirement? That mystical time 50 years from now? Sure, I guess at least partially for that. But as mentioned in a previous post, I wasn't born into a rich family, so for the most part, my reason to save was just to get the bank account as far away from zero as possible. As I worked various jobs, and as the paychecks came in, slowly, my "savings" account grew.

Slowly.

At this point, I'm in my mid-twenties, and the only way I've ever accumulated any money was to exchange time for it.

But what about that savings account "interest" I mentioned earlier? Wasn't this some kind of investment income? Well, if you consider "investment income" to be any return on investment that is 1 cent or greater, then yes, it turns out I was indeed receiving "investment income". We'll come back to this in a bit...

Fast forward a decade.

I had been working for years in my chosen career path, learned about the good life, committed myself to becoming a high performance person to achieve the good life, and tried my hand at a few entrepreneurial pursuits.

In 2019, my minimalism journey lead me to come across a video on YouTube from a channel with practically no subscribers. In the video (which is no longer online), I watched as an average guy from New Zealand with a net worth of about $20K openly discussed his financial situation, and shared the plan he was undergoing to make his savings grow via "term deposits" - a special kind of bank account where you lock in a certain amount of money for a certain amount of time, for a certain rate of return. I recall the guy mentioning a term deposit return of somewhere around 2 to 3 percent.

Although 2 to 3 percent didn't seem particularly high, it was that YouTube video got me to look into my own savings return rate. I was shocked to determine I was getting a 0.02% annual rate on my savings account.

0.02%

To put this into perspective, if you had $30,000 sitting in your savings account, a 0.02% interest rate translates to about 50 cents per month.

A 50 cent return on $30,000.

I couldn't help but feel that $30,000 of unused capital should be generating way more than 50 cents per month. Frustrated, I immediately started researching term deposits in Canada (here known as GICs). I then found a 2.4% term deposit with a competing bank, and put $10,000 into a new GIC on a 1 year term.

About 6 months later, I found a 2.3% interest savings account with yet another bank, which didn't require any lock-in period. I signed up. Then, just this month, the bank with the 2.3% rate emailed me saying they increased the savings account rate to 2.45%.

2.45% is 122.5 times more than 0.02%.

Now, $30,000 in the 2.45% account generates about $60 per month. That's $720 per year instead of the $6 per year I used to earn at 0.02%.

Hard to believe I used to leave so much on the table. I now know that exchanging time for money is not the only way to accumulate money.

Lack of knowledge will cost you.

This aligns with one of Warren Buffet's famous quotes: "The more you learn, the more you earn".

So for those articles that talk about how growing numbers of people aren't doing great financially, what I'm hearing is that growing numbers of people haven't learned meaningful financial knowledge.

Now that you've learned, act now. Research, find, and apply for a better savings rate. If you don't, you'll be doing yourself, your family, and your future a great disservice.

Photo by VanveenJF on Unsplash