$1000 Challenge Exposes the Hidden Cost of Low Savings Rates

Suze Orman's $1K challenge has gone viral in Canada and the US, but it's not just about saving money. It's about making sure that money is working as hard as possible by earning a competitive interest rate.

According to a recent Vanguard survey, over 70% of women feel confident about their ability to save, but nearly half keep their money in accounts earning less than 3%. Orman argues that this is unacceptable and that savers should aim for at least a 3% return on their investment.

In Canada, the interest rate environment is slightly different from the US. The Bank of Canada held its overnight rate at 2.25%, but interest rates on savings accounts vary widely among financial institutions.

For example, RBC's High Interest eSavings account offers a promotional rate of 4.60% for three months, while EQ Bank's Personal Account pays a base rate of 1%. However, this rate increases to 2.75% only if customers receive a qualifying recurring direct deposit of at least $2,000 per month.

Orman's challenge is not about chasing the highest advertised rate but about making sure that savers are aware of the interest rates on their accounts and taking steps to optimize them.