KOHO’s CEO Daniel Eberhard on knowing what to spend your money on

With the summer months coming up (and patio season right around the corner), it’s the perfect time to check-in on that “save more, spend less” resolution we made just a few short months ago. We reached out to KOHO’s CEO Daniel Eberhard to chat about financial health – including how to know what to spend your money on. Because let’s face it: it’s not always easy to know when to treat yourself.

First things first: what is KOHO and how does it work?

Daniel:

KOHO offers Canadians an alternative to their traditional banking experience. It does everything a traditional bank account would normally do – with a pre-paid Visa card, plus a few extra features that we’ve built in to help people build their personal financial ecosystem. KOHO automates how you save, has cash-back features, gives you rich insights, and gives you a ton of control and visibility that you wouldn’t normally have with your bank account. Largely what it does is it provides people with a good financial foundation. We also have a KOHO roadmap available to the public, where people can request features, keep up do date on product releases and help shape the direction of KOHO.

What made you decide to tackle (or disrupt) the financial industry?

Daniel:

I’m pretty industry-agnostic; my background is in wind energy, but I think (hopefully) the theme of my career will be solving important problems on a meaningful scale. Or, at least dedicating my efforts that way. This felt like a worthwhile opportunity to dedicate my professional life to.

When I was looking at starting this company, I asked some of my friends and family for their last three months of bank statements. I looked at my brother’s and he’d paid $85 in bank fees in three months and didn’t even know it. To me that struck me as genuinely unfair. It’s one thing for banks to charge high-paying fees, it’s another thing to make it difficult for people to be aware of those fees. It felt like there was an opportunity to try and move this industry forward.

Technology has made spending money more quick and painless, why do you think it was important for technology to do the same for saving?

Daniel:

How you spend and how you save is all interconnected. There are good types of spending and bad types of spending – and it’s the same thing with saving. There are great savings products and there are terrible savings products. Humans – all of us – have a tough time intuitively understanding our finances. Whether it’s knowing how to save for big purchases or knowing how to assign value to things. And so, leveraging technology to do a lot of that heavy lifting makes a ton of sense.

Is there a big purchase that’s forced you to be a little stricter with your spending in order to afford?

Daniel:

I recently bought a condo and for sure, the stakes get real when you buy a house. Financially, it didn’t really change in terms of how much I was paying monthly because I mapped them to be around the same amount. But the exposure in a condo goes up because now you have a massive debt obligation that you’re assigned to. This changed how I thought about becoming a homeowner: it’s more important now that I have a safety net than it was before. It didn’t change my day-to-day spending or saving, but it did change how I thought about my fallback plans.

At Sonnet, we’re very customer-focused, which is something KOHO stands by as well. How do you prioritize transparency?

Daniel:

I think it has to start internally. We invest time and resources in the values that we think we should have as a company. You have to do it right here if you’re going to do it for your customers. Everybody at KOHO knows what our financial position is, what our last board meeting deck looks like…everybody can see every part of that ecosystem. I think that actually “walking the walk” and taking the risks that are associated with transparency, culturally, is an essential first step.

The second thing that we do is, during our weekly stand-up, we talk about actual customers using KOHO and ways it has impacted them. Remembering there are always real people on the other side of the products helps us be transparent. We talk a lot about amplifying our humanity in our product – we get to build this thing mapped to the customer experience and what is best for the customer. The only way we succeed is if we deliver a ton of value to the customer – and, in order to do that, you need transparency for them to recognize and understand that value.

You started KOHO in Vancouver, and now your office is located in Toronto… two of the most expensive cities to live in Canada. Do you have any budget tips for people who live in these cities?

Daniel:

When it comes to living in the city, I think people do not ascribe the right value to commutes. People will live an hour or two outside the city to save $800 on rent – so, they’ll commute 2 hours a day but that’s $25 dollars a day, $12.50 an hour. I think a lot of people do that math wrong. And quality of life comes into play. It’s not fun spending a few hours commuting – and I know everyone’s financial situation is different and sometimes it’s essential to commute, especially when kids come into the equation. But, if you can’t make that time productive, then the cost of commuting is really high.

As we mentioned before, the summer months are coming up which usually means more spending. Studies have shown that half of Canadians admit that their summer spending habits have a negative effect on their savings. They’re also less likely to pay off any debt during the summertime. Do you have any tips for seasonal budgeting or for when people just aren’t thinking about money?

Daniel:

Summer in the city is a wonderful time. If doing things like patio drinks or concerts drives a lot of happiness and value in your life, then I think that’s time well-spent. Again, there’s good types of saving products and bad types of saving products, but there’s also good and bad saving habits. For some people, living the life of a hermit crab to save isn’t a healthy or happy way to live. I don’t think people should feel guilty about spending money (as long as it’s not credit card debt, etc.) if it brings them happiness.

You mentioned good saving methods vs. bad – do you have any advice for people who think there’s only one way to save?

Daniel:

I think it’s two things. One is, people should treat money as a resource, not as an endgame. And the second, is to understand what the things are that drive value in your life. I’ll give you an example: I recently bought a mattress for $1000. But I’m going to use that mattress for probably 5 years, right? I think about that and that’s like 0.60 cents a day to have a great sleep. So, understanding the value associated with the purchase, and being aware to make sure you have clarity on what’s actually driving value associated with the amount spent.

KOHO is actually building a product to help with this – we’re tracking transaction sentiment so that people can historically understand how much value they get per dollar that they spend.

What do you think people should take into consideration when they’re assigning value to their purchases?

Daniel:

I think there’s a few things to take into consideration:
  • How long you’ll use or have this thing for
  • How much happiness or joy this thing will bring you
  • The cost of the opportunity
Based on the market, when you’re age 60 or 70, a dollar that you don’t spend now will be worth 5 or 6 dollars then. If you understand how things amortize, the relationship to the joy that thing is bringing you, and the opportunity cost of the compound interest you’re losing, then I think you can make financially informed decisions.

Just like saving or paying off debt in the summertime, insurance isn’t always top-of-mind. However, we think insurance should be considered in someone’s overall financial health. How do you think insurance should fit into a budget?

Daniel:

I think that insurance is very event-based. When I buy a house, I now have a big debt exposure, I need to cover it with insurance. I just think about it as a sub-cost when I have a lot of debt exposure or, if I want to control my risk when it comes to things like buying a home, travelling, and protecting the assets I own.

Insurance doesn’t have the most positive reputation – we’re working to change that. You were insured with Sonnet as a tenant before buying your condo, what has your experience been like?

Daniel:

It was great – because most of the value that I get out of insurance is knowing I have it. And I want to have it in the easiest way possible. The customer experience and onboarding with Sonnet was so simple, I was insured within a few minutes. 
Start saving on your insurance.