Credit Counselling Victoria - PDSC Trustee Site

2014-06-16 17:16:15

Where Should I Put My Savings?

financial health checkup

Saving is important; all the financial experts tell us so. Generally though people are saving for more than one thing at a time, and sometimes you want to keep the money for your down payment separate from your rainy day fund, so what are your options for where to keep your money?

A Safety Deposit Box

This is certainly a safe option.  Your money will stay exactly where you put it; it won’t be loaned or lost in bad bank investments.  However, it also won’t gather any interest, which for a saving plan, isn’t great.

In Your Bank Account

Chequing or regular savings accounts also have very low interest rates.  Banks lend money to others when you aren’t using it.  If all of your money is stored in current accounts, you might need it at any point, meaning the bank cannot lend it out and they cannot make any money from it. If they aren’t making money they won’t be giving you any.

High Interest Savings Accounts

These accounts pay higher interest, so just leaving your money there makes you money.  However, they do tend to be a little more restrictive, so make sure you look into the terms and don’t store money there you might need access to immediately or regularly.

Term Deposits or Guaranteed Income Certificates (GICs)

Here you put your savings away for a specified period of time (usually a year or more) and you cannot access it within that time. These tend to be higher interest than HISA (but do check because this isn’t always true).  If you know you won’t need access to your money for a year or more and you have more then $1000 to put in there, this can be a great option.

Tax Free Savings Account (TFSA)

This is a great option and very common amongst Canadians. A TFSA acts as a private tax shelter.  You can deposit up to $5,500 a year and you are not taxed on any interest you earn.  You also don’t pay tax when you take the money out.