Canadian Money Forum banner

1 - 18 of 18 Posts

·
Registered
Joined
·
29 Posts
Discussion Starter #1
I currently have just over $10,000 in a really really low interest TFSA and $30,000 in my chequings account that I would like to put somewhere so that it is at least gaining something.I'm currently about to remortgage my current home and am weighing the options of either saving for a second home to move into in 5 years and rent my current home out,or to just pay off this mortgage and hope prices are in my favor when it is time to move into a larger home. I am looking for advice on a low risk place to put around $35,000 to start that offers growth potential. My bank's current GIC offering is under 1% I believe. Thanks for your time!
 

·
Registered
Joined
·
470 Posts
I am looking for advice on a low risk place to put around $35,000 to start that offers growth potential.
There is a conflict above: "Really safe method" and "low-risk place" generally don't line up with seeking growth.

You don't say much about the rest of your life -- other debt, partner, kids, age, income etc. It's hard to give good advice without knowing some of these things.

However, a couple of thoughts:
1) If the $40,000 is your entire liquid savings, that's a reasonable amount for a rainy day fund. Maybe it's just fine earning a standard HISA rate of ~2%.
2) If your mortgage is readvanceable (i.e. it has a HELOC), and you have an emergency stash, why not put the cash against the mortgage? A 3% mortgage means making an extra payment is a guaranteed 3% return -- and that's after tax! It's very hard to beat that combination of guarantee and return.
3) If you don't have an emergency fund, and you can't pull money back out of the mortgage, then see suggestion 1).
 

·
Registered
Joined
·
29 Posts
Discussion Starter #3 (Edited)
No other debt than 235k mortgage.A fiance who is still on mat leave and will probably take the 18 month with our 9 month old.I have averaged about 80k income over the last 3 years but am in the trades and it is very up and down,I may not even have a job next month,so it would be nice to have access to atleast a portion of the money in case of emergency like you said. My main fear is that my money will end up tied up in my home in 5 years where it may not be a good time to sell my home but am ready to move into a larger home.I like the idea of buying a 2nd home and renting the 1st,until a better time to sell or just to hold on to.I am currently locked in at 2.69% for 5 years for my remortgaging come April 2020.Thanks for your reply.

edit:I guess I am asking for ideas to place the money where it is safe and has SOME growth,in a 5 year plan.Impossible I am sure :p
 

·
Registered
Joined
·
10,097 Posts
The only safe investments are GICs and HISAs. There are a number of online banks like EQ Bank and Oaken Financial that will get you more than 2% on your money. Anything else is going to have 'capital ' risk of some sort. You could 'gamble' with an 'all in one' balanced fund from your bank's asset management group on the hopes that markets will be kind and it will be worth more than what you started with, or be flexible enough 5 years down the road to wait another year or two for the 'investment' to recover in value if it has gone south.

IOW, either you accept 2-2.5% on your savings, or you have flexibility in 5 years to go another few years if necessary for your investment to regain its value.

Lastly, why is a larger home important in about 5 years? Why does anyone 'need' a larger home? And why should you care, or even be interested in renting out the first home? I hear too much from those who think RE has nowhere to go but up...just because in some locations in this country, prices have been marching up in recent history.
 

·
Registered
Joined
·
29 Posts
Discussion Starter #5
Thanks for the reply!The home I am currently my family will definitely grow out of 5 years from now,not mentioning the area is undesirable and the property itself is undersized.I am interested in renting out the home as an opportunity for income in the future,but also because I don't trust my local economy enough for the housing prices to be at a point where I am not taking a loss on the sale of the home.I am looking at it as using the home to pay itself off while the value increases over time,which of course could be wishful thinking!

Sorry for my ignorance but is it only online banks that offer these decent interests rate normally?I've never seen numbers that high posted by my bank.(CIBC)
 

·
Registered
Joined
·
2,186 Posts
Sorry for my ignorance but is it only online banks that offer these decent interests rate normally?I've never seen numbers that high posted by my bank.(CIBC)
Have to do some research on the net. Manitoba online credit unions offer high rates.

I would put max 2% into a mixture of ETHE, ETCG & GBTC play small for a potential to win big. Based on price pattern Bitcoin & Ethereum looks like they have completed one two to the upside & now in wave 1 of a 3rd wave up of a 5 wave. In plain English thy look like they will rally strongly for 2020. If correct the 2% will most likely have better returns then being 100% in stocks with a lot less risk since only 2% is on the table.

On an ABC rally that corrects the recent decline in the S&P a far out of the money put going out to 2022 I think is a high/reward for the risk. A few hundred dollars. If market crashes 50 fold plus return would not surprise me.

The rest I would put in GICs though not with a bank only a credit union
 

·
Registered
Joined
·
470 Posts
No other debt than 235k mortgage.A fiance who is still on mat leave and will probably take the 18 month with our 9 month old.I have averaged about 80k income over the last 3 years but am in the trades and it is very up and down,I may not even have a job next month,so it would be nice to have access to atleast a portion of the money in case of emergency like you said. My main fear is that my money will end up tied up in my home in 5 years where it may not be a good time to sell my home but am ready to move into a larger home.I like the idea of buying a 2nd home and renting the 1st,until a better time to sell or just to hold on to.I am currently locked in at 2.69% for 5 years for my remortgaging come April 2020.Thanks for your reply.

edit:I guess I am asking for ideas to place the money where it is safe and has SOME growth,in a 5 year plan.Impossible I am sure :p
You don't mention anything about other savings/investments.
However, in your situation -- fiance on mat leave, young child, variable income from an insecure job -- I would very, very conservative with that money. (Unless you have another big egg that you haven't mentioned.)
Set up a TFSA and put the cash into a high-interest savings account.

As for the real-estate plan to rent out your current house, that typically doesn't make sense. And for most people it's a big headache.
If you crunch the numbers and the rent income more than covers all your costs, then maybe it can be worthwhile. But trust the numbers. Don't go with your gut.
I'm guessing you will have better uses for the equity.
 

·
Registered
Joined
·
29 Posts
Discussion Starter #8
Only other investment is $5000 RRSP into a Labour Sponsored Fund that can reroll in 6 years,and a work pension valued at around $100,000 to date.What I have mentioned is everything I have that is liquid.I agree with you on being conservative!

As for the rental part,I am only considering this IF my house is valued below what I bought it for. I am under the impression that renting the property out during the time it would be sold at a loss would be better than selling it for a loss.In this 5 year period I would be saving,placing my savings in a safe format with low risk low growth(better than my checkings account) enough for a down payment on another home.I don't know if what I am saying even makes sense,but it is based on the resale value of my current home.
 

·
Registered
Joined
·
1,704 Posts
Shouldn't you have more room than $10K in your TFSA? I would recommend opening a TFSA at Oaken where you can get 2.3% in a HISA and fill the maximum TFSA room you have. A TFSA HISA is a good place to keep your emergency fund anyway, so moving some or most of your 30k cash there would be a reasonable move. Cash in CDIC insured bank account is about as safe as you can get.
 

·
Registered
Joined
·
16,651 Posts
The only safe investments are GICs and HISAs. There are a number of online banks like EQ Bank and Oaken Financial that will get you more than 2% on your money. Anything else is going to have 'capital ' risk of some sort.
Listen to AltaRed and fireseeker... good advice overall. These guys are pros.

Simplii Financial (which is actually CIBC) is offering 2.8% interest until April 30. As an additional benefit, they have pretty good GIC rates: 2.15% for 1 year,
2.20% for 2 years. Here's the link to Simplii (CIBC) 2.8% interest promotion

Obviously look around at competing offers, but one idea would be to grab their 2.8% interest until that runs out, then move the money to a GIC within the same bank. Either way you'd be getting well over 2% interest.

I like the idea of buying a 2nd home and renting the 1st,until a better time to sell or just to hold on to.
I have a couple friends who tried that and it looked to me like it was stressful for them. All of them seemed to be much happier once they sold and got back to only having one home, but I'm just viewing that from a distance.
 

·
Registered
Joined
·
10,517 Posts
Pretty sure AltaRed has indicated he's been retired a long time, where previous jobs were outside finance/personal finance.


Agree that there is an excellent history of posts for ideas/advice/keeping perspective.


Cheers
 

·
Registered
Joined
·
168 Posts
Perhaps I'm being too picky. For most, "they are pros" is just a figure of speech. But I think it is bad form to leave open the literal meaning, which is objectively false. Maybe I'm being a bit too Mukhang pera-ish.
 

·
Registered
Joined
·
10,097 Posts
Figure of speech obviously. Any investment industry professional here should have disclosed it already.

I am a retired P.Eng. who took a serious interest in personal finance and investment starting in the '90s. I tend to want to understand the forest first before drilling down on a variety of species.
 

·
Registered
Joined
·
2 Posts
I really had problems with stuff like that because no one has ever taught me how to do taxes or stuff like that. Every payment that I was ever doing was with my credit card and that was wrong. My boyfriend taught me something about online payments and he told me to go get a Skrill account on https://baxity.com/. I did that and now I feel much safer with that payment system. I even got some perks because I registered with Baxity. I really love their website because you can get a lot of info about payment systems. I have never even heard about skrill before I started using it and on their website I learned that Skrill is a very experienced company that works with International transactions. I use it for everything now and so far I had no problems with it.
 

·
Registered
Joined
·
11 Posts
I'm rather conservative personally, but this line right here,

"...but am in the trades and it is very up and down, I may not even have a job next month..."

would lead me to put this money somewhere very safe and not take any risks with it at all. Especially since you have a young family, I wouldn't risk anything as due to job uncertainty there is a chance you may need it to cover daily expenses.

As such, I'd agree with the others that TFSA and High-Interest Savings Account are the way to go. At least until you have a clearer picture/idea of your future income.
 
1 - 18 of 18 Posts
Top