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Where to hold cash?

Where can we hold cash to at least earn something while we wait for more buying opportunities?

Q – We continue to enjoy reading your newsletter, thanks for your ongoing efforts producing it.

Like many we are starting to hold significant amounts of cash in all our accounts (RRSP, RRIF, and TSFA). We would appreciate knowing your advice on where to hold the cash to at least earn something while we wait for more buying opportunities (perhaps early in the new year) and further stabilities to occur (tariff and trade settlements etc.). We’re pretty open minded, however tend to be on the conservative side with investments (generally preferring value for long term with a touch of growth) and always appreciate keeping our costs associated with such investments to a minimum.

Thank you in advance for sharing your thoughts. – Dave L.

A – With interest rates so low, the best place for cash right now is a high-interest savings account. But you have to turn to smaller financial institutions like credit unions or on-line banks to get the best rates. That means paying closer attention to deposit insurance coverage – is your money protected by the Canada Deposit Insurance Corporation (CDIC) or by a provincial program? The CDIC is an independent Crown corporation, established in 1967. As such, it is backed by Ottawa and protects your deposits (principal and interest) up to $100,000. You can find more details at www.cdic.com.

Some provincial plans offer higher coverage limits, but their financial backing is not as strong and varies between provinces. Ask for specific details if you are consider going that route.

The best return I can find at present is from Motive Financial’s Savvy Savings Account, which just lowered its rate to 2.4% from 2.8% previously. That can happen any time with high-interest savings accounts, so you have to stay on top of them. Motive Financial is an on-line division of Canadian Western Bank, so your money is protected by CDIC.

EQ Bank, the on-line operation of Equitable Bank, is a close second with a rate of 2.3%. It too is covered by CDIC.

High interest accounts usually come with restrictions, such as a limit on the number of cheques you can write or a maximum amount you can deposit. Some are not be available for registered accounts – EQ Bank does not offer RRSPs or TFSAs whereas Motive does. Each company has its own policies, so you’ll have to do some research. – G.P.