Disclaimer from [[Investing Playbook]] still applies. :) # Introduction ## The value of your cash is shrinking - When you leave your money on your bank account as consumer or a company, you usually get nothing in return. It feels basically the same, as having bank notes or coins under your mattress. The only difference is that it's supposed to be more secure in the bank. - The issue for both situations is that when there is inflation, the value of your money diminishes (= the price of goods and service increases, but you have the same quantity of money as you've always had). - This means that when your money doesn't grow on your bank account, you are not maintaing the same wealth, you're getting poorer. - The only solution to maintain the same wealth is to have your money grow at the same rate as inflation. - And if you want to develop your wealth, you need to grow your money faster than inflation. For this, you can read the [[Investing Playbook]]. That is ideally where most of your liquid wealth (outside of owning businesses) should be. - But outside of what you invest, there is probably money that you want to keep very accessible for everyday use or emergencies. This money is probably going to stay at some bank and will shrink versus inflation. Here we are only going to talk about that part. ## Your bank is earning interest on your money - Do you know that when you leave money in your bank account, your money doesn't grow, but your bank is actually getting interest on your money? - Yes, when you deposit money at the bank, the bank deposits the money at the European Central Bank (EU) or Federal Reserve (US) and is then paid by these central banks at the interest rate of the moment. In EU, it's called the €STR or Ester (€uro Short Term Rate) published every day by the ECB. - When the interest rates are low (or even negative like they were in the 2010's), the banks are not making a lot of money, something even losing money on this. - But when the interest rate are higher, it's one of the main ways for retail banks for make money on your deposits, and this interest is rarely shared to the consumer. It's rare to find a checking account that is paying interest to the consumers or the companies. - The good news is that some neo-banks have started offering flexible cash accounts, where you can get most of that interest paid daily. Instead of giving interest to everyone on the checking account, they created flexible cash accounts, where you can instantly move money to or withdraw money from this account. The difference between the interest rate that they offer to the consumer and the interest rate of the given central bank (EUR or US) is the bank's margin. - The flexible cash accounts includes some risk of capital, but so do your usually checking accounts anyway. ## Your money is not that safe anyway - **There are many risks with preserving your money:** all frequent throughout history - Risk of inflation shrinking the value of your money: the value of your money slowly diminishes all the same - Risk of your country going bankrupt or devaluating its currency: the value of your money is greatly diminished one day - Risk of your bank going bankrupt or being partially bailed out: you lose part or all of your money - **"Yes, but the bank told me there is a protection. Right?... Right?"** - Yes, it exists in almost all UE countries or the US. - In France, it's called the FGDR. It exists, but if there is a crisis, the funds won't be enough to cover for everyone. - More details in the "Risks on having your cash in a bank account" section in [[Permanent Portfolio - Investing strategy]]. # The criteria we're looing for 1. Getting paid for the interest on your money: ~~inflation risk~~ 2. Being multi-currency: ~~currency risk~~ 3. Having multiple banks in different countries: ~~bank & country risks~~ # Some solutions on the market Some neobanks allow you to: - Have different currencies on your account: more precisely to have different sub-accounts inside your account (one per currency) - Get interests on your deposits (if you activate the option) - Pay with a debit card everywhere in the world without insane fees - These neo-banks are based in different countries and usually offer the same level of protection than the traditional banks on your deposits. Some of them that people recommended me: ## Wise - **Card:** [Wise](https://wise.com/) can be used as a personal daily checking account. You get a physical debit card for a one-time fee. - **Interests:** Wise provide savings accounts that pays interests daily in USD, GBP and EUR. The interests on each currency that they pay to their customers tend to be higher than the interests paid by Revolut (can be more than 1% difference). You can check easily by going to both websites, they usually updates their interest rates very regularly. - **Exchange rates:** It's usually the most competitive option to convert >1000 EUR/USD in other currencies: [Wise Fees for Sending Money](https://wise.com/fr/pricing/send-money) - Comparing Revolut vs Wise - [Wise Vs Revolut: Which Is The Best For You? – Forbes Advisor Australia](https://www.forbes.com/advisor/au/money-transfer/wise-vs-revolut-comparison/) - [Revolut vs Wise: Which is better in 2024? Fees, Cards & More - Wise](https://wise.com/us/blog/revolut-vs-wise) - [Compare Revolut vs Wise - Wise](https://wise.com/gb/compare/revolut-vs-wise) - [Wise vs Revolut: Compare Money Transfers, Multi-Currency Accounts, and Exchange Rates | Revolut Ireland](https://www.revolut.com/en-IE/blog/post/wise-vs-revolut/) ## Revolut - **Card:** [Revolut](https://revolut.com) can be used as a personal daily checking account and provide good analytics on your spending. You get a physical debit card for a one-time fee. - **Interests:** Revolut provides "Flexible cash accounts" that pays interests daily in USD, GBP and EUR. - **Exchange rates:** Revolut is very competitive for exchange rates as well. However, in the free plan, there are two additional fees compared to Wise: - 1% fee if you converted more than 1000 EUR in the last 30 days - 1% fee if you convert money on weekends ## Yuh - **Card:** [Yuh](https://www.yuh.com) can be used as a personal daily checking account. It is a favorite for French people working in Switzerland. It's an easy way for them to have a bank account outside the European Union. You get a physical debit card for free. - **Interests:** The interests are lower than Wise and Revolut, but you can get interest in CHF which is complementary to Wise and Revolut which provides interests on USD, EUR and GBP. Thus, you can store CHF on Yuh and let them grow. In 2024, inflation in Switzerland is 1.5% par year and you get paid 0.75% on your deposit. Not ideal but better than nothing for holding CHF. Also, as opposed to Wise and Revolut which pay the interest daily, Yuh pays them once a year. [More details](https://www.yuh.com/en/yuhlearn/only-got-eyes-yuh-why-our-interest-rate-will-make-you-fall-love/). - **Exchange rates:** The exchange rate fees (market rate + 0.95% commission) are not as good as Wise and Revolut, but Yuh provides a full Swiss account, that allows to receive CHF, EUR and USD. However, you can always convert your money on some other service and then send it to your Yuh account. - You can even invest in ETFs on Yuh. However the 0.5% fee on the ETF buying makes it more expensive than other brokers (more information here: [[How to choose a broker (Choix du courtier)]]. # Final disclaimer - As always be cautious, neobanks and traditional banks can have support team that are not always very available, and the financial system is complex. They can mess things up. Divide your risk. Do your research. But what do I know. 🤷‍♂️