Why keep so much in a savings account? | General financial discussion | Discussion forum

suburbs4life said
I have to ask this in case I am missing something ..... why does it seem like many posters here are keeping at least a couple $100K in savings accounts?? Saving for house down payments? I imagine some are retired but people keep that much liquid at a time? Maybe many people on this board are in the 0.01% of the population but I don’t suspect that. Should your money not be making more than inflation for wealth generation? Instead of losing to inflation and Annual interest taxation. I only ask to learn other people’s motivations with moving money from 1.25% accounts to 1.5% which is negligible after taxes. Even a 100k deposit at most is an extra $250 before taxes if the said promo lasts 12 months.  

Well put. I would also like to hear responses.

My guess is, that people "with money" are closer to, or in retirement, and of those, some see through the brainwashing mantra of the world's society, that preaches Wealth Generation. You walk into any FI, and they, upon seeing a five figure balance (for a few days, because it is between the "shifts"), always suggest some investment (they get bonus points). When I point out, that I do not need to Generate Wealth, that I am content with what I have, and together with the pension, I am OK until I die, they always fine reasons, why I should Wealth Generate, e.g. "you'll have more(!), leave a legacy, give to charity", etc." (provided, that markets go up). I always keep in mind, that when I buy any other goods, I can return it, when it is not working, sometimes even with "no questions asked". Have you ever tried to "return" your investment purchase (Nortel,...)?
My bottom line: "Julio, don't become greedy, no matter what."

It’s prob for those that has couple of hundreds in cash or near cash (gic), they may or may not have proportional amount in other assets like equities etc.
It’s of paramount truth that risk tolerance goes down and should go down as age goes up. Esp if one already has amass enuf for life, really little reason to earn 6% with risk vs 2% risk free.

COIN said
I have a home equity line of credit in case I need some quick cash.

BTW: I think very few young people are members because they are probably spending their time on Facebook.  

Actually the Facebook population is middle age and up believe it or not. Tons of groups re plants, animal lovers, restaurant reviews and all populated with a lot of seniors believe it or not !

The young generation have left Facebook years ago as soon as the ‘older folks’ started using it. Millenniums are in Instagram, and a bunch of others ‘hip’ platform. My young adult daughter is the living proof lol

All good wishes for your new house and family!
Try to keep saving a bit every month in a TFSA, at least for a rainy day fund. You can catch up with the rest later.

I suppose if you put $20K/year into HISAs and GICs for 30 years and returns after tax are able to keep up with inflation (which I personally don't see happening but others on here have said it's possible) then you'll have about $600K in today's terms. Then if you live for another 30 years and manage to continue to keep up with inflation during that time that gives you equivalent of today's $20K/year on top of CPP, OAS, etc. to spend.

Also, I think wealth contained within workplace pension plans are underrated by many young people, don't give them enough weight when choosing employment. It's common for medium to large-size employers to have money purchase pension plans where they match (or so) the employee's contribution, i.e. you put in $10K a year and you make 100% on it the first year. That can be a pile at retirement time too.

Facebook's for boomers, instagram for millennials, tiktok for the youngsters, is my understanding.

topgun said

More realistically. Put 2K per year into some form of equity investments @ 7% for 25 years. Company pension plans are good. Never was a consideration when I started out. I was happy to have a job.  

Equity investment of 7% compound return for 25 years is not realistic sadly.

Pension plans --- I think the vast majority of defined benefits pension plans are in the public sector funded jointly by you and the beneficiary.

How does the Teachers Pension Plan manage to pay an index pension for a teacher who retires at age 55?

For folk who truly want a portion of their net worth in guaranteed investments, it is still very difficult to beat a 5 year GIC ladder over longer, e.g. 10 year, periods of time. For those who want more liquidity as per Loonie's early post, HISA accounts and promotions likely offer the best opportunities. How much of each should mostly depend on where one is in the journey of life.

There are a lot of good reasons for Loonie to do what Loonie is doing in one's mid-70s. Being in my early '70s, I want the flexibility to call on substantial amounts of cash, e.g. high 5 figures perhaps, for certain family emergency situations, an impulse Corvette purchase, etc. I don't want a HELOC for that purpose and I would rather not have to rely on selling equities at an inopportune time which could very well coincide with a family 'situation'. It does not bother me that this 'cash' is not in the market working to get me 5+% longer term.

FWIW, I don't see a need for younger folk with employment earning power to hold more than an Emergency Fund in HISA cash...or better yet, to use a HELOC for that purpose. Cash at current rates is a drag and it is only relevant that one hold enough cash to manage bumps in the road while they still have debt on the books (mortgage, auto loan, etc).

Ultimately, it is up to each individual to assess their personal risk (volatility) tolerance to decide how much to hold in a liquid and/or guaranteed form.

100% agree with AltaRed's last paragraph - aside from the fact I see no upside for me to give advice it's why I refuse to give even a bit of financial advice to anyone, especially family. Part of the burden of adulthood is taking the time to figure out, like I did, what lets you sleep well at night, is what I tell them.

Recently one adult child did persist in pestering me what to do with a bit of a windfall, so finally I did tell them generally a couple of investments I did/do but then pointed out they were in a completely different situation, in a number of ways, than I ever was, so it might be better for them to NOT do that. Luckily they left more confused than before they asked.