How to Money

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Suggested accounts

The following will depend on your citizenship (what passport you have), your residency (where you live), your tax residency and tax obligation (based on a combination of your citizenship, residency, age, and more), but is a good starting point.

You should list these accounts on the asset side of your balance sheet (and on the liabilities side if you still have any debt accounts).

At minimum, you should have the following accounts:

Cash / current account (for day-to-day spending; no growth)

Savings / money market account (for your three-month emergency fund; working off debt; future savings; and some of the slow growing cash part of your portfolio)

Tax-advantage accounts like retirement and tax-free accounts (to get “free” tax money back or pay no/low tax on gains when you’re grey and old)

Investment accounts (to grow your money, by investing not saving)

Cash accounts

Remember, cash loses value over time, due to inflation. If inflation is 8% today and you spend 100 dollars, rand, or pesos on a shopping cart of goods at the supermarket, you will only be able to fill the basket 92% of the way when you spend that same amount in a year’s time. So, protect your cash against inflation, by growing it.

Cheque or current accounts

This might be called a cheque account, current account, cuenta corriente, transactional account, or simply “bank account”. These accounts usually don’t earn any interest, so the money in them loses value over time due to inflation. This is one of the dumber places to keep your money. Your salary and wages should be paid into this account, and from there, you should transfer most of it out to:

pay off debts (any loans you might have);

to save (in an account that grows over time an fights inflation)

to invest (in your retirement account, tax-free investment account, normal investment and savings accounts);

and only keep the amount you will need to live for the rest of the current month (housing, meals, normal expenses).

This account should ideally not have more than 1.5x months of living expenses.

Suggested bank accounts

Get a bank account that gives you a contactless bank card and online banking, with the lowest monthly fee.

In the 🇬🇧 UK, 🇺🇸 US, and 🇲🇽 Mexico, these accounts are available free of charge, from all of the big banks. Don’t get the premium accounts: you can sit in airport lounges once you’re retired, not before.

In 🇿🇦 South Africa, I recommend Standard Bank’s MyMo account (or FNB Zero). There are small charges per month and per transaction (like making bank EFT payments, debit orders, etc.) but it is one of the cheapest accounts to just do your day-to-day banking.

Savings accounts

When you open a bank account, as above, the bank might also offer you a linked savings account. These accounts earn some interest, but usually very little —often only 0.2%— so I never use them. You might want to use it to set up your emergency fund (but it’s not the best way to do so since inflation will eat up a lot of your savings).

I rather recommend opening a dedicated, separate savings account that will protect against inflation. You should keep the following money in this account:

your three-month emergency fund;

any short-term savings, like saving up for a holiday or a large purchase;

any other money (that you might want to invest at a later stage).

Suggested cash savings accounts

In 🇿🇦 South Africa, I recommend opening an account with Coronation (or with Sygnia with their shit UX) and making deposits into their money market account. Don’t use your Coronation or Sygnia account to make stock, index fund, mutual fund, or any other investments, as there are better ways of investing in those; you need to make sure when you deposit money it’s to the money market account.

Sign up, initiate a deposit to be invested into your money market account, and transfer the money from your SA bank account via EFT (it might take a day or two). Choose to reinvest the interest, paid out at the end of each month, to let compound interest do its magic. When you need the money, sign into Coronation, and initiate a withdrawal to your SA bank account.

In 🇲🇽 Mexico, it’s easy to earn a high rate of interest (thousands of times better than what the banks offer you). The Mexican government allows residents to invest (directly in guaranteed, short-term government bonds) at

CetesDirecto⁠

Sign up for an account and make the SPEI bank transfer to the CLABE they give you. After you’ve made a deposit, you will automatically start earning interest at the BONDIA rate (mira este

este video⁠

) and withdraw the money (your deposit plus the interest you earned), whenever you want (during regular weekdays). Alternatively, you can invest in longer-term investments (30, 60, 90, 365 days etc.) where you can only withdraw the money (deposit plus interest) at the end of the time period.

Más info aquí⁠

In the 🇬🇧 United Kingdom, the

NS&I⁠

offer different ways to invest directly in government bonds. The interest you’ll earn is currently lower than inflation, but it is still a better way to protect your cash than a bank or normal savings account. Shop around.

In the 🇺🇸 US, you can buy bonds from the government at

Treasury Direct⁠

. Cash accounts with Wealthfront and Betterment now offer 4.5% on your US dollar cash. (Jul 2023).

Note: you might also be able to buy bonds or bond-backed ETFs from your personal investment platform and those platforms sometimes also offer handsome interest on cash balances.

Retirement and other tax-benefit accounts

These accounts all roughly follow the same idea: your government will give you money to save. (It’s generally stupid not to take free money.) Read:

Taxes⁠

⁠

🇿🇦 South Africa

There are many pension and retirement annuity (RA) accounts available. As we know, nobody can control or forecast the future (neither you nor retirement fund managers), so you should choose based on what you can control: fees. The

lowest-cost⁠

fund, the one with the lowest fees, is still

Sygnia⁠

, so open an RA account with them. You can transfer your RA balance to any other RA provider in South Africa, so if a cheaper one becomes available, do so. Set up automatic transfers (debit orders) to automatically invest up to 27.5% of your income into this account (you can invest more than 27.5% of your income, but you won’t get a tax benefit). You can access the money again when you’re 55, or if you financially emigrate before that.

Secondly, you get an annual allowance to invest in a tax-free savings account (TFSA). This is a bit of a misnomer since you don’t have to save the money, you can invest it (into smart things like low-cost index funds). Open a TFSA with

Easy Equities⁠

and invest in an S&P500 (or other) ETF. Important: don’t deposit/invest more than the annual TFSA allowance, as you’ll have to pay penalties.

🇬🇧 United Kingdom

The UK offers citizens a tonne of great tax-beneficial accounts. Lots of free money.

Lifetime ISA (LISA). You’ll get up to £1,000 free money if you invest up to £4,000 per year. Open an account with

AJ Bell⁠

and invest in the lowest-cost fund available. You can only withdraw from this when you’re older.

Junior ISA (JISA). An account you need to set up for your kids. Anyone can pay into the account (up to £9,000 per year), all the gains are theirs, tax-free. They become the account owners when they turn 18, when they can withdraw from it (to pay for university, for instance), or just keep it invested for later. Nobody else can withdraw from this account. Open a JISA with

Vanguard UK⁠

and invest in low-cost index funds.

Self-invested personal pension (SIPP). You get tax relief (money back from the government), you don’t pay taxes on the growth of the investment, and your heirs can inherit it, tax-free. Open a SIPP with

Vanguard UK⁠

and invest in low-cost index funds. You can only withdraw from this when you’re older.

Employer investor plan. Your employer might offer a pension plan (and may match contributions to the plan up to a certain amount each month/year). Ask and contribute the maximum available. You can only withdraw from this when you’re older.

Stocks and Shares ISA. The UK government allows you to invest up to £20,000 per year in an ISA (a cash ISA or a S&S ISA). The growth of this money is not taxed. So it is smarter to put the money in higher-risk/higher-return things (like index funds through an S&S ISA) than into savings (through a cash ISA). Open a Stocks & Shares ISA with

Vanguard UK⁠

and invest the maximum after-tax money into this account. You can withdraw from this at any time.

General trading account. If you’ve taken advantage of all the tax advantages above, you can invest the rest of your money via a general trading account. Open a General Trading Account with

Vanguard UK⁠

. Invest in low-cost index funds. You may need to pay taxes on the dividends and growth. You can withdraw at any time.

Investment accounts

This is the money you want to grow. Ideally, you will keep investing here without selling any of the investments for at least 3-8 years (but the longer you keep it, the more it will grow, thank you compound interest).

I created two dedicated pages for this:

Investing basics⁠

and

Investment accounts⁠

(but also see

Index funds deep dive⁠

Credit score account

In the same way that countries are rated by their creditworthiness (how likely they are to pay back their debt and the rate of interest they need to pay), individuals have a credit score. A credit score is simply a number to indicate how “risky” you are to companies, banks, landlords, and employers.

If you have a healthy credit score, you'll save money by getting better loans, and better jobs, you'll be more likely to get the house or apartment you're after and pay less in deposits. It's also a way to monitor against identity theft, where fraudsters open accounts in your name, run up debt without you knowing, and you only find out one day when you're trying to access credit or apply for a job.

You should be able to get a credit report in most countries for cheap or free of charge. Google around.

In 🇿🇦 I use

ClearScore⁠

. They should send you a monthly email with the latest changes to your report (if not, set a monthly reminder to check it).

For 🇲🇽 try

https://www.circulodecredito.com.mx/home⁠

https://www.burodecredito.com.mx/⁠

(not personally tested)

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