Author Topic: 5-year short-term savings vehicle - Canada  (Read 1257 times)

MBot

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5-year short-term savings vehicle - Canada
« on: May 22, 2014, 08:45:21 PM »
For a Canadian, what would you suggest for a short-term (up to about 5 years) savings vehicle? It would not be a lump-sum. It would be one towards which we could make monthly contributions.

I am in Repayment Assistance for my student loans in Ontario. Our total for my and my spouse's loans is about 100k and we're able to put about $1500/month towards them. That gives us about a 5 1/2-year window for payoff.

When in Repayment Assistance, our loans are at 0%. RAP could end at any time. (we are reassessed every 6 months). My guess is we'll keep getting it for another 2-3 years, possibly up to 5 years. When it does, the interest rate becomes prime +2.5%. Although some would be comfortable paying the minimum on that and keeping other priorities ahead, we would not be.

However, as long as Repayment Assistance keeps going on, our loans are at 0% and we don't have to pay more than the minimum (about $550 for both of us). That leaves $950 a month.

This means we could:

(a) pay off the loans which are at 0% interest with that $950

(b) invest the money in something else for longer-term payoff (again, not something I'm ready to do at the moment).

(c) invest the money in a short-term savings vehicle that earns some interest, until our repayment assistance ends. Then we have a nice chunk that's earned at least a little interest, that we can use to pay it off.

It would be helpful to hear what specific banks/products would you suggest, but also your rationale for why this is the best option. If there is an option (d) I am not considering - that' s also great to hear!

daverobev

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Re: 5-year short-term savings vehicle - Canada
« Reply #1 on: May 23, 2014, 11:15:30 AM »
People's Trust TFSA at 3% is, AFAIK, the best non-promo rate at the moment.

Whether to use your TFSA room like that depends on if you're using it already (obviously), and whether you'd be better off using it to invest if you have the spare cash to do so.

If not, throw all this spare-ish money in there, up to your limit, and earn 3% til you need it.