Saving money is a great goal, but it’s a fairly broad one. Think of it this way: are you saving towards a large one-time purchase, a down payment on a house, a rainy day fund, or your retirement? Those are completely different objectives with wildly variable costs and timelines. Depending on what your specific needs and plans are, several different savings options may work well for you. The secret is knowing which solution to use for each goal!
Here’s a general overview of where to put your savings based on your intention for those funds. For personalized financial guidance from an expert on our team, please contact us! We’d be glad to hear from you.
Goal: upcoming expense or emergency fund
If you’re saving up for an expense that’s happening in the near future—for example, a weekend away with your significant other or the purchase of a new couch—consider an investment savings account. This is a great option if you want to keep your money tucked away where it will earn interest while remaining easily accessible. There are typically low fees (or none at all) required to maintain these accounts and it’s easy to set up an automatic transfer to help the balance grow week after week. Because a savings investment account is so quick and straightforward to access, it’s also a great option if you’re trying to build an emergency or “rainy day” savings fund.
Goal: an expense that’s 12-18 months away
Now, let’s say you’re saving towards a planned expense that’s a little further away—for example, an international vacation that’s going to cost several thousand dollars or a new air conditioner you know you’ll need by next summer. In this scenario, a redeemable term deposit may be the ideal savings vehicle. A term deposit is a cash investment with a guaranteed return at a fixed interest rate over a set period of time—sometimes with interest payments made to you on an annual basis. Examples of this type of savings vehicle include a Guaranteed Investment Certificates (GIC). While non-redeemable term investments have set parameters that dictate when you can withdraw funds without penalty, a redeemable term deposit is more flexible. Ask your advisor about this option as there are pros (earning interest) as well as cons (waiting up to 30 days to access funds).
Goal: an expense that’s 18-36 months away
If you’ve got a longer timeline for your savings goal and are looking for a higher return on investment, a non-redeemable term deposit may be the ideal savings vehicle for you. While non-redeemable term deposits have much stricter withdrawal rules than redeemable term deposits, the higher rates of return are often worth it. That said, it’s important to understand the details of this type of investment before locking into one—when you will be able to cash out, penalties for cashing out early, whether or not the investment is considered “cashable” throughout the term, the interest rate you’ll be getting, interest payouts and more. Again, we recommend speaking to an advisor to determine if this option is right for you.
Goal: long-term savings
Having a specific savings goal is great, but sometimes, you’re just trying to increase your net worth and improve your financial health. Or, perhaps you’re looking ahead at retirement, your first home or the cost of a child’s post-secondary education and want to be prepared for those expenses when the time comes. If your savings goals are substantial or farther down the line, consider speaking with our wealth team to develop a personalized plan. There are several different choices you can make, including market-based investment options, and together we can determine which is the best fit for you. Thanks for reading and please contact us if you have any questions—we’d be pleased to arrange a meeting and discuss your goals.