Savings account - does it make sense?

[Brent.ff]

Curious for thoughts, does it make sense to have some money just sitting in a 'high-interest' (I know, laughable) savings account, instead of just having full TFSA? I'm close to maxed on my TFSA but have a fair bit in a savings doing fuk all. Obviously the trade off is the speed that you can get into that money, but its not like if i needed emergency funds that i couldn't use my VISA while pulling from TFSA. Its been on my brain this week to make my money work better for me.

[Mitsu3000gt]

I would say no. I'd much rather have it in an ETF or something in my TFSA or RRSP. If you have room left in your TFSA that's a no-brainer. A bank's savings account is only better when your other options are literally zero rate of return. It's pretty much the worst place you can let your money sit other than under the mattress or your sock drawer.

[lasimmon]

I keep a small amount (1-2K) in my "high interest Savings" account just as a "in-case" thing. Like you said if you really need money it only takes a day or 2 to pull from your TFSA, and you could dump it on your visa as you said.

[ExtraSlow]

If it helps you sleep at night or you are saving for a specific purpose maybe.
From a math perspective no.

[msommers]

If you really wanted a savings account, I think Scotia's Momentum Plus isn't that bad (relatively speaking). You get a max of 2.3% right now if you keep it in there for a year but can take it out whenever you want, just take a hit on the interest you'd get. Basically a flexible GIC (no idea what rates those are even at these days). I think it's a promo they have until February.

Otherwise, I'd look elsewhere.

[Brent.ff]

Ok, so what if im maxed on my TFSA?

[Mitsu3000gt]

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Ok, so what if im maxed on my TFSA?

Max out RRSP next. Then just put it in other investments or real estate or kids RESP...or literally anywhere but just sitting in the bank making $2 a month.

Sign up with Questrade or Interactive Brokers.

[taemo]

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I keep a small amount (1-2K) in my "high interest Savings" account just as a "in-case" thing. Like you said if you really need money it only takes a day or 2 to pull from your TFSA, and you could dump it on your visa as you said.

same, I keep 2K on my high interest saving for emergency, especially if it needs to be cash. then rest on TFSA and RRSP

[holden]

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Max out RRSP next. Then just put it in other investments or real estate or kids RESP...or literally anywhere but just sitting in the bank making $2 a month.

Sign up with Questrade or Interactive Brokers.

What if you've maxed out TFSA, RRSP and RESP (amount to get max refund). Also, this would be an emergency fund, so would prefer not to invest it in equities.

[Mitsu3000gt]

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What if you've maxed out TFSA, RRSP and RESP (amount to get max refund). Also, this would be an emergency fund, so would prefer not to invest it in equities.

Then just open a normal investing account and start making some money. Keep whatever you need for emergency (if it's beyond what your credit card limits could provide) + your day-to-day cash and invest the rest.

[Xtrema]

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If you really wanted a savings account, I think Scotia's Momentum Plus isn't that bad (relatively speaking). You get a max of 2.3% right now if you keep it in there for a year but can take it out whenever you want, just take a hit on the interest you'd get. Basically a flexible GIC (no idea what rates those are even at these days). I think it's a promo they have until February.

Otherwise, I'd look elsewhere.

Teaser rate. 2.3% only for 2 months, drop back down to 1.7 in March that is if you keep it in there for more than a year.

It's not worth the hassle to get 0.6% more for 2 months. ie. that's an extra $10 for $10K.

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What if you've maxed out TFSA, RRSP and RESP (amount to get max refund). Also, this would be an emergency fund, so would prefer not to invest it in equities.

Normal saving account has no interest. High interest saving account has 0.8 to 1.7% (0.4-0.8% after tax) depends on who you are with. If this is emergency cash, pick one that you can access the easiest. Not everyone got the stomach for the market.

But these saving account is last place you should put $ in. Service all your debt first unless you have debt that is 0-1% or debt is on a depreciating asset.

[realazy]

There are other CDIC insured banks that offer more interest than the big banks. EQ Bank is at 2.3% interest right now without a promotional period.

[blownz]

I am in a similar situation (maxed RRSP, RESP, TFSA) and I have the "high" interest savings account and an unregistered investing account. The high interest account is where I put all my spare money each pay, and then once the account hits $20-30K I bring it back down to just under $10K and keep going. It depends on if I know bigger spending is coming up but I usually find $10K is a good number to have. Last month my wife booked a $9K trip and I don't like to deal with an investment account for that. Right now my balance is higher than usual, but Jan 1 I need $16K for RESP and TFSA but then I will be low again. The reason I don't like touching my investment account is because I look at it as long term and don't want to get in a habit of pulling money out. I pretend it is locked in like an RRSP.

I would personally have both accounts and keep the high interest account at whatever number you need for impulse spending.

[Disoblige]

What if you maxed TFSA, still have RRSP contribution room, but have a lot in high interest savings?
Why would you want to put it all into RRSP and have much less accessible savings (assuming putting most of it in your RRSP would give you less than 6-12 months of savings)? I know a lot of people max RRSP, just curious on the mindset. If you got laid off or whatever reason in this situation, where is your spare cash?

Example scenario:
TFSA: Maxed
RRSP: Still have 60k contribution room
HI Savings: 80k

[holden]

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What if you maxed TFSA (use it for short term high risk trading), have a good chunk in RRSP (but no where near maxed), and have a lot sitting in high interest account?
Why would you want to put it all into RRSP and have much less accessible savings? I know a lot of people max RRSP, just curious on the mindset. If you got laid off or whatever reason in this situation, where is your spare cash?

Why would your RRSP not be accessible? You just would need to pay tax on the withdrawal. Not much different than the tax you had to pay if you kept it in a non-registered account.

[Disoblige]

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Why would your RRSP not be accessible? You just would need to pay tax on the withdrawal. Not much different than the tax you had to pay if you kept it in a non-registered account.

So why would you want to put yourself into a situation where you could possibly pay withholding tax on TOP of normal income tax? That's a shit ton of tax.

[blownz]

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What if you maxed TFSA, still have RRSP contribution room, but have a lot in high interest savings?
Why would you want to put it all into RRSP and have much less accessible savings (assuming putting most of it in your RRSP would give you less than 6-12 months of savings)? I know a lot of people max RRSP, just curious on the mindset. If you got laid off or whatever reason in this situation, where is your spare cash?

Example scenario:
TFSA: Maxed
RRSP: Still have 60k contribution room
HI Savings: 80k

I personally think you need balance. Back when we first had our kids and my wife was a stay at home mom, it was impossible for me to max out RRSP/TFSA/RESP and have anything left in an emergency fund. I had to scale back in those years and top up later.

And leaving RRSP's for later I think is usually a good idea as in later years you will likely be in a higher tax bracket so the return at tax time will be better. I was mostly trying to just get myself down the the next tax bracket.

[Sugarphreak]

...

[Disoblige]

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I personally think you need balance. Back when we first had our kids and my wife was a stay at home mom, it was impossible for me to max out RRSP/TFSA/RESP and have anything left in an emergency fund. I had to scale back in those years and top up later.

And leaving RRSP's for later I think is usually a good idea as in later years you will likely be in a higher tax bracket so the return at tax time will be better. I was mostly trying to just get myself down the the next tax bracket.

I agree with this.

On a side note, if your company offers your bonus as a direct deposit into RRSP, I usually would go this route if you have ample contribution room. It's pretty much no different than putting a % of your paycheck into the RRSP over time, but feels better mentally when it's a lump sum contribution.

[Xtrema]

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What if you maxed TFSA, still have RRSP contribution room, but have a lot in high interest savings?
Why would you want to put it all into RRSP and have much less accessible savings (assuming putting most of it in your RRSP would give you less than 6-12 months of savings)? I know a lot of people max RRSP, just curious on the mindset. If you got laid off or whatever reason in this situation, where is your spare cash?

Example scenario:
TFSA: Maxed
RRSP: Still have 60k contribution room
HI Savings: 80k

It really depends on your income and tax situation. If interest from HI Saving isn't taxed at the top brackets, it doesn't really matter.

But if it was me, I would max out RRSP and keep $20K in HI Saving. $20K should eve enough to run me at least 2-3 months. More if I clamp down to just essentials, may be even more if I qualify for EI. In that time, I could easily determine if I need to withdraw form TFSA. And after that run out, RRSP will be your ticket.

Or if you don't like RRSP, you have a mortgage right? Pay that off. A typical 25 year mortgage of $300K will incur $125K of interest. Why pay the lender that much when you don't have to? You can always access it as HELOC if you need a secured loan later.

Some people like to save RRSP room until they get the promotion or something. But I rather max it out and let it grow protected. Worse case scenario, I pay more taxes when I need to withdraw it as RRIF. That's actually a pretty good problem to have.