Canada Savings Bonds | General financial discussion | Discussion forum

I'm going to sell my house and put all the equity into those lucrative Canada Savings Bonds!

mike said:

James said:

I'm going to sell my house and put all the equity into those lucrative Canada Savings Bonds!

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You would actually "save money" by doing just that as the housing market is still dropping in value and CDN bonds are not.

Sell in a bubble, higher mortgage rates and high unemployment will drop prices.

Mike

You can do that, thanks. I'll come out ahead by keeping my house, since I bought really low.

I'm in agreement that Canada Savings Bonds are a joke at the rates they are trying to flog. Why on earth would someone buy one of those when they can stick their money in CDIC-insured savings accounts or GICs from the online banks (I refuse to call them "high interest savings acocunts" until rates start to climb again) and get an interest rate that's at least double and even four-times the government rate (depending on the online bank you're talking about and whether you buy a standard or premium Canada bond)? You can only buy up to $500,000 of Canada bonds, so if you're really risk-adverse and you want close-to-guaranteed earnings on $500K of savings, you can split it up into multiple CIDC-insured banks thus insuring the entire amount. I think a lot of people are falling for the "100% backed by the Government of Canada" shtick and not bothering to do a little research into other options that pay more and are still 100% guaranteed. And as far as homes as investments go, I think you can make arguments either way depending on what the economic climate happens to be at the time, but I'll take home ownership over renting any day for the simple reason that once you've got the house paid off, nobody can kick you off your land unless you don't pay your municipal taxes. As a renter, you are at the whim of your landlord, even if you have a long-term lease (landlords can and will find creative ways to "motivate" you to break the lease if the landlord thinks they can make more money by not having you in the building).

How will I end up underwater? The market value is still four times what I paid for it and the mortgage is gone. According to you, I should invest in 0.4% CSBs. Unreal.

I don't understand their reasoning either. We bought our 1949 house in 1999 when prices were very low, for around $118,500 before tax. It's since appreciated 35% or so in value, stayed there, and is paid off as of this summer. We're certainly not underwater. Normal buyers shouldn't be - as nobody but speculative house flippers buy a house for the purpose of expecting to make a financial profit. I approach housing as buy low once and hold. It was a great time to buy housing back then for anyone who planned to live in their home for decades. The only thing that I find annoying is the fact that, of course, as your housing keeps going up in market value, the higher the property taxes, but for me it still only amounts to an extra few hundred a year in property taxes currently compared to 1999.

I feel sorry for young people buying houses these days. When I look at the prices of houses for sale it seems impossible to find anything that's what I'd EVER consider affordable or frugal in a city - unless you buy one of those scarce mini "hydro houses" and are handy enough to renovate it yourself. If I was shopping for a house at age 23 today I'd feel very intimidated not to mention broke each month carrying that kind of cost.

Allocating your savings into a variety of 1.5% to 2% high interest savings accounts, or investing in 3.7+% locked-in 5 year bank GICs seems more sensible to me than Canada Savings Bonds. You just make sure your money isn't all in one basket so that you maximize CDIC coverage and spread the risk around, regardless of the size of your portfolio.

Allocating your savings into a variety of 1.5% to 2% high interest savings accounts, or investing in 3.7+% locked-in 5 year bank GICs seems more sensible to me than Canada Savings Bonds. You just make sure your money isn't all in one basket so that you maximize CDIC coverage and spread the risk around, regardless of the size of your portfolio.

I agree for the most part. However, good luck finding a "high-interest" savings account at 2%. ING Direct has the audacity to call theirs an Investment Savings Account while they offer 1.05%. I'm starting to long for the days (around 1990) when I could open a savings account at any of the big banks and earn 9%.

Actually, Ally Canada is offering a rate of 2.00% on their savings account. I had been in ING, but Ally is so much better, I recently opened an account with them. 5 year GIC's with Ally are currently 3.6%. I know Maxa's is slightly better, but they are not part of CDIC, so I'm a bit reluctant to invest with them.

I have been asking for about a week for an explanation of Edward Jones 2 % accounts. Today I'll try to get into their office and find out. 2% is much closer to a high interest account than many of the banks in the comparison chart.