Where to park your short term cash now

A sound investment strategy involves keeping some of your portfolio in cash. But where should you put it? Below we look at some of the options available to you for investing cash, from high-interest savings accounts to term deposits and GICs.

Investment PlanningThe bull market’s invincibility has been shaken by the correction that occurred in late January and early February. Combine this with rising interest rates and the lesson is clear: greater care in portfolio management is warranted at this time.

One way to reduce your vulnerability to future market setbacks is to include some cash in your portfolio. A standard rule-of-thumb for a balanced portfolio is to keep anywhere up to five per cent of it in cash. That said, where’s the best place to park cash?

You might think Canada’s big five banks are the best place. After all, they’re big, well-heeled and seemingly everywhere. But when it comes to the highest interest rates, the big five are usually nowhere to be found.

Take, for example, Royal Bank. It offers a high-interest savings account that pays 0.9 per cent. But this return pales in comparison to those offered by Canada’s many smaller financial institutions. And your money should be just as safe with these institutions assuming they have sufficient deposit insurance coverage, such as that offered by the Canada Deposit Insurance Corporation (CDIC).

Three high-interest savings accounts

EQ Bank offers 2.30 per cent on its high-interest savings account. EQ is part of Equitable Bank, a bank with over four decades of experience in the Canadian market. It’s a federally regulated Schedule I Bank with over 600 employees and total assets under management of about $23 billion. It offers mortgages, home equity lines of credit and a variety of deposit services. Equitable Bank, founded in the 1970s as The Equitable Trust Company, is a wholly-owned subsidiary of Equitable Group Inc., whose common and preferred shares trade on the TSX.

The EQ Bank Savings Plus Account comes with no monthly fees, no minimum balance, unlimited transactions, and other perks. Authorized to accept deposits in all provinces and territories, EQ is eligible for deposit insurance from the CDIC. You can reach the bank at 1-844-437-2265 or eqbank.ca.

Hubert Financial offers 2.10 per cent on its high-interest savings account. Hubert is an online financial institution, which keeps costs down and, therefore, lets it pay higher interest. It’s an online division of Sunova Credit Union, one of the top-100 credit unions in Canada. Manitoba-based Sunova has been in operation since the 1940s.

Hubert’s high-interest savings account is 100-per-cent guaranteed by the Deposit Guarantee Corporation of Manitoba, no minimum balance is required and there is no monthly service fee. All Canadians, excluding those in Quebec, who are over the age of 18 are eligible to open an account with Hubert. Its phone number is 1-855-4HUBERT and its website is happysavings.ca.

Take your pick of AcceleRate Financial, Alterna Bank or Achieva Financial for a high-interest savings account that offers 2.05 per cent. AcceleRate is the virtual division of Crosstown Credit Union, a Manitoba-based financial institution (1-888-954-9543 or acceleratefinacial.ca). Alterna Bank is a subsidiary of Alterna Savings, a 100-year-old credit union, and the first in Canada outside Quebec (1-866-560-0120 or alternabank.ca) Achieva was created as a division of Manitoba-based Cambrian Credit Union (1-877-ACHIEVA or ahieva.mb.ca).

Some alternatives

We believe the five financial institutions highlighted on this page offer you the highest returns you can get from high-interest savings accounts in Canada. Another option is to park your cash in a term deposit, where you can keep your money for periods of 30 to 270 days. The highest rates offered on these types of accounts that we currently know of are provided by Oaken Financial, a division of Home Trust. Oaken offers from 2.00 per cent on its 30-day deposit to as high as 2.40 per cent on its 270-day deposit. Oaken’s phone number is 1-855-OAKEN-22 and its website is oaken.com.

Cashable guaranteed investment certificates are another option you might consider. Oaken offers 1.80 and 1.90 per cent on these GICs.

This is an edited version of an article that was originally published for subscribers in the March 16, 2018, issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.

The Investment Reporter, MPL Communications Inc.
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