The hourly salary of switching bank

The calculations will assume you have free and fast access to the internet from your home.

Most large bank salary accounts have 0% to 1% interest rate.

On Ikanobanken ( which is IKEAs bank in Sweden ) you currently get 4%. At Ikanobanken you don't get any credit card or similar, but overnight transfers from and to your accounts are possible, so you can keep your old account and transfer money to and from the Ikano account easily using the internet (provided your old bank has a decent internet system, if nit, switch bank immediately).

Opening an account took 10 minutes for me. Each transfer takes about five minutes of internet work.

About one transfer each week will cost you 5*50 + 10 = 260 minutes a year .

Your big bank will if you are lucky give you close to 1%. Ikanobanken gives 3.55% (2007-11-27). The interest ratio difference is about 3%.

Update 2008-01-24: Kaupthing now offers 4.5% in a product called 'Edge'

Now to the question: what are your immediately accessible savings? Many people have none, the government recommends about a salary. This article assumes the modest amount of 10000 SEK.

3% interest rate on 10000 SEK is 300 SEK.

Swedish tax on financial gains are 30%. After tax on the yearly interest we get 270 SEK. Not much you think. Compared to the 260 minutes we roughly spend per year to earn these 270 SEK we roughly get 60 SEK an hour as our hourly salary.

How bad is 60sek an hour after tax on a normal job?

I was browsing some statistics and found that a Swedish public sector employee would earn about 21500sek a month in 2006 which is about 21500/175 SEK an hour = 123 SEK/hour

Personally, I add the time it takes to get to and from work (1 hour a day or about 20 hours a month) and subtracts job related costs such as transportation cost (620 SEK a month for public transportation) and extra expensive food (30sek/day). Your costs may differ but they are still important. Go ahead and make your own calculations. My estimates are by my standards not very pessimistic.

Expenses for work: 620 + (20*30) = 1220sek

Expenses for work converted to before-tax-income: 1220sek/59.5% = 2050sek. The conversion factor is calculated as 100% - 32.5% - 8% = 59.5%, numbers which are explained later in this article.

21500 - 2050 = 19450sek/month

175 + 20 = 195 (hours)

corrected hourly salary before tax: 19450 / 195 = 99.50 SEK

Tax is about 32,5 percent for kommun (same geographical place the medium salary statistics was taken from) and state tax in 2006 is 8% at 21500 SEK/month income .

99,5 SEK/hour * (32.5% + 8%) = 99.5 SEK/hour * 40.5% = 40,3 SEK /hour

Hourly salary after tax: 59.2 SEK.

Conclusions

This little exercise shows that the 'peanuts persepctive' - 300 SEK is nothing after tax is misguided. It is misguided because after tax in Sweden, your salary ain't much either. We are asking if 59.2 SEK/hour is much more worth than 60sek/hour. I think I have shown that for relatively small amounts of buffer savings for swedes with normal incomes, it is actually worth switching bank as much as it is worth getting out of bed and go to work each day.

In case you earn a lot more than 21500sek/month, I suspect you have larger buffer. Given the Swedish progressive tax system, I would expect the answer to if it is worth to switch bank to be even more affirmative.