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Email this8:49 am
May 24, 2016
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It appears to me that some forum members have large amounts of cash in savings accounts rather than using GICs. If anyone is willing to share why this is so, I'd be interested to hear the pros and cons.
9:32 am
December 17, 2016
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I'm currently averaging 2.423% across 3 HISA accounts, with minimum effort and immediate access. I could probably do better IF I wanted to open more accounts BUT I don't want to open anymore accounts - obviously leaving money on the table, see the DUCA thread -
https://www.highinterestsavings.ca/forum/general-comparisons/duca-2-5-now-till-august/
ACTUALLY, make that 2 HISA accounts, since I pulled out of one, yesterday. I also have a BIG 5 account to run the daily living through, an account that earns zero interest.
10:36 am
February 17, 2013
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Well....once I had all my loans/LOC/mortgage/credit cards paid off, I decided to never again take out another and not buy anything if I couldn't pay cash for it. New car? New appliances? renovations? Cash (through credit cards for rewards of course). Need to have some to spend it and GICs don't afford liquidity. So here is my liquid cash breakdown:
50K (6 months wages) emergency fund
12K for next years TFSA contribution
10K for next years RSP contributions
20K personal savings (10K each for me and the wife) to use as we see fit
I do have all my long term RSP/TFSA's in GICs so I always have the contributions ready for deposit as soon as the room comes available (Jan 1 for TFSA and Mar 2 for RSP), which offers a tax deduction on my paycheck for the RSPs for the remainder of the year and maximizes interest paid and reduces taxes owed. Divide total TFSA/RSP contributions by 52 and that is our minimum weekly deposit to savings for next years registered plans. Interest earned until then is a bonus.
Bottom line? Averaging 3.22% with the Tang promos this year, and I can't find a GIC that will offer that by locking it in for even 5 years so why not keep playing Tangs game? Interest rates seem to be on an upward trend so I am leery of locking anything in for 2 or more years. Even with EQ I can keep some cash liquid and earn a better rate than some 2 year terms so why bother locking it in?
Once rates for GIC's go over 3%, we will reevaluate how much and long we should lock it in.
6:01 pm
April 6, 2013
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Rick said
I do have all my long term RSP/TFSA's in GICs so I always have the contributions ready for deposit as soon as the room comes available (Jan 1 for TFSA and Mar 2 for RSP), …
RRSP contribution room for the year also becomes available on January 1.
RRSP contributions during the first 60 days of the year have to be reported on Schedule 7 of the tax return for the taxation year before. But, the deduction for the contributions can be taken on line 208 of that same tax return or of the tax return of a subsequent taxation year.
10:36 pm
February 17, 2013
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Norman1 said
Rick said
I do have all my long term RSP/TFSA's in GICs so I always have the contributions ready for deposit as soon as the room comes available (Jan 1 for TFSA and Mar 2 for RSP), …RRSP contribution room for the year also becomes available on January 1.
RRSP contributions during the first 60 days of the year have to be reported on Schedule 7 of the tax return for the taxation year before. But, the deduction for the contributions can be taken on line 208 of that same tax return or of the tax return of a subsequent taxation year.
Did not know that. Thanx! How do you know how much to contribute in January before you do your taxes if you don't get your T4's and registered pension contribution receipts until Feb 28 at the latest? CRA said the same thing when I sent in my T1213... make your RSP contributions in January. Can't make the contribution until you know how much you are allowed to contribute.
11:43 pm
December 4, 2016
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There is a baby sitting aspect to GICs as companies like to renew them. By default GICs are set to renew. One has to change this. But if there is a system upgrade or something, even if you set it up to not renew, it might renew. So, to me GICs are annoying in that way.
Companies want you to lock in with them. They want you to be stuck with them. GICs make you stuck. It's sort of like why they push, RRSPs and RESPs so hard. They know it's hard to move those things.
It's also like those people that want you to put your money in a locked in RRSP for like 30-50 years with large take out penalties. They don't tell you they get money for selling these guys products for them to you. To me they are not good products, as you're locking in your money and can not change things as one should with changes in lifestyle, markets, governments, etc.
Anyways. One does get compensated for the locked in aspect. But not enough for me to lock my money away. I rather make less and have it available to move around. Things change, and as they change one likes to change allocations, which might include using GICs.
In addition. When I locked in my money. I would think about it in unhealthy ways. Like, more than I wanted or I would normally do if it were just in a savings account. Because there is more risk with less control potentially.
5:40 am
September 11, 2013
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Rick, when you contribute in January just use an estimate based on your previous year's numbers, leaving a margin of safety if you like, and then you can top-up to limit once you have the numbers for the present year. Anyway it's not a big deal as you can overcontribute by $2000 (on a cumulative basis) without penalty.
Re GICs, as I'm not interested in anything beyond a year term I've been leaving my GIC-money in HISAs as I've been beating the one-year GIC rates via HISA promos for a few years now.
9:01 am
December 20, 2016
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User230 said
There is a baby sitting aspect to GICs as companies like to renew them. By default GICs are set to renew. One has to change this. But if there is a system upgrade or something, even if you set it up to not renew, it might renew. So, to me GICs are annoying in that way.
I see investing is akin to operating a business, albeit a personal business, and as such requires diligent record keeping and planning.
By using these strategies, records of transactions are maintained, along with reminders and notifications of upcoming renewals and other significant events so appropriate actions can be taken.
10:55 am
April 6, 2013
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Rick said
Did not know that. Thanx! How do you know how much to contribute in January before you do your taxes if you don't get your T4's and registered pension contribution receipts until Feb 28 at the latest? CRA said the same thing when I sent in my T1213... make your RSP contributions in January. Can't make the contribution until you know how much you are allowed to contribute.
Moved response to new topic Estimating RRSP contribution room in January.
11:29 am
April 6, 2013
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Bill said
…
Re GICs, as I'm not interested in anything beyond a year term I've been leaving my GIC-money in HISAs as I've been beating the one-year GIC rates via HISA promos for a few years now.
My reason as well.
The rates on some savings accounts, include rate specials, are higher than on 30 day term deposits.
EQ Bank's current 2.3% on their Savings Plus Account is above the 2% Oaken was offering on their 30 day term deposits. Oaken has since reduced their 30 day term deposit rate to 1.6%. That is now below the 1.9% Alterna Bank is offering on their eSavings account.
One also used to be able to get better rates by buying money market instruments through a broker. Not these days. If one could somehow buy Government of Canada 90-day treasury bills at wholesale prices, without any commissions, the yield would be an underwhelming 0.99%.
11:18 pm
February 17, 2013
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Norman1 said
My reason as well.
The rates on some savings accounts, include rate specials, are higher than on 30 day term deposits.
EQ Bank's current 2.3% on their Savings Plus Account is above the 2% Oaken was offering on their 30 day term deposits. Oaken has since reduced their 30 day term deposit rate to 1.6%. That is now below the 1.9% Alterna Bank is offering on their eSavings account.
One also used to be able to get better rates by buying money market instruments through a broker. Not these days. If one could somehow buy Government of Canada 90-day treasury bills at wholesale prices, without any commissions, the yield would be an underwhelming 0.99%.
Thats all good for non-registered accounts, I play that game as well. Averaged 3.22% with Tang promos so far this year. But I'm not chasing rates around with my registered stuff. I have nothing in Tang in a registered account. Keeping track of dates and rates is not that big a time consuming hassle..... I kind of enjoy it. Have to call Motive Monday and get my last GIC rate bumped up .05% (WOO-HOO!!!!) under their 2 week rate guarantee.
2:12 pm
October 21, 2013
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User230 said
There is a baby sitting aspect to GICs as companies like to renew them. By default GICs are set to renew. One has to change this. But if there is a system upgrade or something, even if you set it up to not renew, it might renew. So, to me GICs are annoying in that way.
Another thing you have to watch for with "system upgrades" - not restricted to computer upgrades - is that banks will sometimes "lose" your POA instructions. I had this happen with TD a few years back. They "upgraded" their system and invented a complicated new POA form which required me to give any and all powers to my POA. The previous form just applied to the account in question. I now realize this is best dealt with through a lawyer, but it's a warning to those with longstanding accounts if you thought you had a POA in place but have not had to use it.
2:37 pm
October 21, 2013
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As for savings vs GICs, I will admit I have a lot in savings, less in GICs.
I have perhaps a psychological block against GICs. It probably depends on age, but I am old enough that long-term friends are dying and I can't say if I'll be here in five years, so that seems a long time to lock in. I think to myself, if I lock in, I may never see this money again. It's somewhat irrational, I admit. With rates being so low, it's been easy to think this way.
That said, I think it's worth paying attention to patterns in rates, and where they seem to be heading.
As rates were falling over the last several years, the better "deals" on GIC rates were for shorter and shorter terms until it got to the point where a savings account rate was often better than even a one or two year GIC.
Now that rates are creeping up (with some hope that they may continue to slowly do so), the trend is starting (only starting) to reverse. Savings rates currently seem to be struggling between the fact that the bank rate went up (which puts pressure on them to increase) and borrowers wanting to lock in because they fear higher rates (which means less demand for our savings account funds and 0ne year GICs). As they try to find their equilibrium, some have gone up (Hubert etc), some have gone down (Meridian, Oaken), and some have remained the same (EQ, Alterna), so far. And Tangerine is all over the map. Even where rates have gone up, they have not kept pace with BoC increases and may not match inflation. This situation may not last, as the bank rate improves, assuming it does.
Rationally, it should be a decision based on trying to keep ahead of these trends so that you get the best bang for your buck over time. Thus, at some times you'd be better off with savings accounts and at other times better with GICs. However, this will always be tempered by other factors such as need for shorter terms availability, personality, and which way the wind is blowing.
There are undoubtedly people who are capable of analyzing these things in more detail than I, but that's my layperson's observations.
As for the GICs themselves, you are usually better off, over time, with five year terms. This was proven in a ManuLife study which I cited in another thread. Right now may be one of the exceptions.
3:39 pm
February 17, 2013
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Loonie said
As for savings vs GICs, I will admit I have a lot in savings, less in GICs.
I have perhaps a psychological block against GICs. It probably depends on age, but I am old enough that long-term friends are dying and I can't say if I'll be here in five years, so that seems a long time to lock in. I think to myself, if I lock in, I may never see this money again. It's somewhat irrational, I admit. With rates being so low, it's been easy to think this way.
Hoping to never have to spend that money. Plan is to use it to supplement pensions with the interest from the GIC's, either TFSA or RSP. Can't take it with you and want to leave something for the kids when we are gone.
Loonie said
That said, I think it's worth paying attention to patterns in rates, and where they seem to be heading.
Now that rates are creeping up (with some hope that they may continue to slowly do so), the trend is starting (only starting) to reverse. This situation may not last, as the bank rate improves, assuming it does.
Rationally, it should be a decision based on trying to keep ahead of these trends so that you get the best bang for your buck over time.
As for the GICs themselves, you are usually better off, over time, with five year terms. This was proven in a ManuLife study which I cited in another thread. Right now may be one of the exceptions.
Guess the trick is to figure out if the rates will change significantly enough one way or another to decide on length of term. I think you're right...now is one of the exceptions. The 3 years @ motive have gone from 1.85 to 2.55 since spring. My psychological barrier is 3% for a five year. Getting close, but not common yet.
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