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Comment by aronpye | Hacker News Reader

Why would you ever have a savings account? They’re pointless as they always earn little interest. Much better to invest in an ETF that tracks something like the S&P500 with an average year on year growth of 10%, or if that is too risky invest in a government bond.

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> or if that is too risky invest in a government bond.

You can get 1% in a savings account in the US. TBill rates are all less than 0.25%. The latter has tax benefits, but not enough.

One good way to "get a higher return" (for some at least) is to pay down debt. If your mortgage is at 3%, whatever you pay off is "earning" 2ish% after tax. If your margin loan is at 1.5%, anything you pay off earns 1.5% (because the interest isn't deductible.)

One of the things I do is use interest free credit cards to pay for my usual expenses such as food and fuel. That frees up cash. I then use that cash to invest in ETFs. When the interest free period on the credit card expires I either sell the ETFs to pay it off or use an interest free balance transfer card to carry the debt. In that case, as long as the transfer fee is below your rate of return + inflation you profit.

You then pocket the net return on investment from the ETFs. The risk mitigation is that the interest free period is usually over 2 years, enough time for a stock market recovery should a downturn happen and you fail to time to market and sell on a high.

interests are not linear, also most credits and mortgages will have a commission when you pay down a percentage of it, at least in Europe

Mortgages might be a poor example because of prepayment penalties, the ability for a lender to choose to apply an excess payment to future interest payments instead of the current principal, and all sorts of things (each situation is different, you just need to do the math).

Something like a credit card or student loan in places where those are common might be better targets. They usually have ordinary compounding interest, and the delta in your net worth (assuming no other effects like taxes) between investing P dollars at an interest rate R for time T is identical to paying off P dollars of a debt at an interest rate R and waiting till time T has elapsed.

Because it makes since to keep an emergency fund, even a small amount, say 10-15k, will earn 125-150 (obviously more or less depending on rate) in a savings account is better than roughly 0 in a checking account.

What I do is use credit cards to cover emergency expenses and then sell some of my bond ETFs to pay the loan after a few days.

That way I get to earn 2/3% interest and have liquid access to my money.

I invest in ETFs this 10% yearly grow doesn't happen over a longer term and some years are negative. Overall expect 5%.

But it does though ...

https://www.macrotrends.net/2526/sp-500-historical-annual-re...

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