# what to do with surplus cash.



## the-royal-mail (Dec 11, 2009)

Hi everyone, new member to the forum. I have read many of the existing threads and decided to post here to get some feedback to a good problem I have.

1. no debts, car is paid.
2. recurring monthly expenses kept as low as possible include cable (just basic MTS TV), basic phone and electricity, food, spending money, rent costs*.
3. $10K in TFSA (from 2009 and 2010)
4. $11K in RRSPs (still down about $3K from what I paid for them and this was built up since 2001)
5. I would like to have between $10-20K in rainy day funds, cash available on a moment's notice due to life adversity. I currently have about $17K saved (including the money I stuck in the TFSA's to get 1% interest).
6. I feel secure in my job and have a pension plan. I'm in my mid-30s and well educated with lots of good work experience.

The problem is that I am saving a lot of money these days and am not really sure what the best thing to do with it is. I've considered gold, mattress stuffing, donating to my favourite charity but definitely not wasting or throwing away the money. And I am not interested in putting any more money in RRSPs or other stock/mutual funds. GICs don't pay a lot, especially the cashable kind that I would want.

So, what's the best way to deal with this? Where should I put the money? 

*I am not too interested in buying property as I appreciate the freedom and privacy afforded by high rise apartment living. I am quiet and live in a clean, quality building with good neighbors. I did own a condo in such a bldg before but in the final analysis found that the property taxes, condo fees and real estate fees really consumed any profit I made in the eventual sale price. Not really a worthwhile exercise other than lining the pockets of RE agents etc. I may go the property route later but do not want this discussion to end up being a rent vs. buy discussion.


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## OptsyEagle (Nov 29, 2009)

From what you describe, a high interest savings account paying about 1% is your only option ... for now.

By the way. The reason you didn't benefit from ownership versus renting was most likely because you didn't give it long enough time. Owning almost always swamps renting, but not always right away.

Good luck to you.


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## Wealthy1Day (Aug 30, 2009)

the-royal-mail said:


> 5. I would like to have between $10-20K in rainy day funds, cash available on a moment's notice due to life adversity. I currently have about $17K saved (including the money I stuck in the TFSA's to get 1% interest).
> 
> And I am not interested in putting any more money in RRSPs or other stock/mutual funds. GICs don't pay a lot, especially the cashable kind that I would want.


Of the $17K you have saved, I'm certainly in agreement with the $10K maxing your TFSA contributions. However, although I hear that you are not interested in putting any more money in RRSPs or non-registered investments, you also state that GICs don't pay a lot. Neither does $7K sitting in your bank account not working for you.

I understand that you wish to build a $10-20K rainy day fund. You're well over $10K already and only $3K from the high end of your goal. But I'm a proponent of having money work for you versus building an emergency fund. If your retirement planning and personal finances are top notch then you don't need an emergency fund since an LOC during a rough ride will be fine since you have zero debt today. 

Your finances are great. Maximize your TFSA (which you're doing) and your RRSP (and defer tax), maintain your strong financial situation including no debt and have your money work for you instead of it just sitting around.


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## ldk (Nov 10, 2009)

may I ask what prompted your decision to not continue investing inside an RRSP?

we are currently trying to decide if RRSP's are the most tax-efficient way to continue to invest, so I am interested in your thought process.


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## the-royal-mail (Dec 11, 2009)

Thanks for the responses thus far. I'll keep monitoring this for any further responses.

Regarding the RRSP question, I started the RRSP thing before I had a job that had a pension plan. I've been saving up that money since 2001 over both aggressive and moderate profiles and am dismayed that a full 9 years later I am still $3K behind the 8 ball. There always seems to be some sort of an explanation for why this is and these never benefit me. 9 years of negative growth doesn't inspire me to invest any further and all the stock market and exec bonus nonsense over the past couple of years has me wanting to move that money out of there when it regains value, if it regains value. But that's really off topic for this thread. I just wanted to answer the question that was posed. 

Regarding the property thing, I might deal with that later but that's not a high priority for me. I'm fairly busy with work and other interests that I'm not interested in the whole upkeep thing and the condo thing seems to feed the real estate and other middlemen, machine. By doing it this way I can instead pocket the cash and then come here for advise on where to put the cash. 

Good point about my $7K not making anything in the bank. But the difference between that and what I would get in a CSB or GIC is maybe $35 a year? I don't need the $35 that badly to bother to go and stand and wait at the bank and do all sorts of paperwork, have to review my information and profile etc etc. As I said above, I'm a bit busy so the returns have to be really worthwhile for me to bother doing red tape.

Thanks for the replies thus far and any further ones!


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## brad (May 22, 2009)

the-royal-mail said:


> And I am not interested in putting any more money in RRSPs or other stock/mutual funds.


This is the part I don't understand. Just because you may have lost some money over the short term, it doesn't mean RRSP's aren't a smart long-term investment. In fact they're just about the smartest long-term investment you can think of. Let's say you buy $10,000 worth of shares in index funds and bonds today, and at the end of the year they're only worth $5,000. You might think you just threw away $5,000, but you're thinking too short-term. The important thing is that you own the shares in those funds, and eventually those shares will gain in value. Maybe not this year, but over the decades you have remaining until you reach retirement, they should grow.

I find the best mentality for long-term investment in stocks and funds is to think in terms of how many shares you own, not what their current value is. The current value is irrelevant; what matters is their value when you're close to retirement age. You're young enough that topping off your RRSPs should be a priority, because they'll have decades to grow before you need them.

There's also nothing to stop you from opening up some new RRSPs and putting them into something other than the stock market if the stock market scares you.


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## Sampson (Apr 3, 2009)

the-royal-mail said:


> So, what's the best way to deal with this? Where should I put the money?


Congrats on the enviable position.

While you are asking "where you should put your money", I think the more prudent question you need to ask yourself is what do you want to achieve financially. 

This is only an assumption, but I would guess that you don't have a concrete plan ahead of you. One that outlines, (i) what you'll want to own (real estate or not, cars etc), (ii) spend $$$ on (vacations, toys etc.), but most importantly (iii) life directions (marriage, children, retirement).

These factors and level of 'quality' you want for them will determine both how MUCH money you'll need, and also WHEN you'll need it. Based on the how much and when, you can then derive what you'll need to do with your money in terms of savings rates, rates or returns etc that will be required. Based on those last two factors, it will be much easier to decide where your money should go. 

It may turn out that you could achieve your financial goals by leaving your money in a bank account and incur minimal risk, the only way to know is to set at least a framework or loose plan in place.

Good luck!


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## Four Pillars (Apr 5, 2009)

Don't confuse rrsp accounts with the riskiness of the investments you can buy in them. If you want less risk then you can buy GICs inside your RRSP if you want.

The fact that your rrsp account has gone down in value has nothing to do with the fact that it is an rrsp account.

If your pension is in good shape then perhaps you are saving too much? But it really depends on your long-term goals.


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## Dr_V (Oct 27, 2009)

Four Pillars said:


> The fact that your rrsp account has gone down in value has nothing to do with the fact that it is an rrsp account.


*Exactly* my thought.

That said, GICs aren't without risk (e.g., in cases of low-return versus high inflation), but they're not a bad start. <== The article that I linked has a few other good, low-risk ideas.

K.


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## the-royal-mail (Dec 11, 2009)

Good point about the RRSP account. However, the reason I don't want to put my $7K in there is because that $7K is part of my rainy day fund, which needs to be available to me without penalty on short notice. I have gone through more than one layoff where it took me a year (give or take) to find work again. So even with the LOC (which is racking up debt) available to me, I would prefer to have cash as a starting point and only go to LOC if the cash runs out. It has happened. Putting this money in an RRSP makes it difficult to access.

And really, I'm thinking more of the money I will be saving beyond this ideal rainy day amount. Maybe it could be placed in a RRSP GIC if interest rates should ever improve.


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## the-royal-mail (Dec 11, 2009)

Dr_V said:


> *Exactly* my thought.
> 
> That said, GICs aren't without risk (e.g., in cases of low-return versus high inflation), but they're not a bad start. <== The article that I linked has a few other good, low-risk ideas.
> 
> K.


Interesting article - thanks!


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## brad (May 22, 2009)

the-royal-mail said:


> Maybe it could be placed in a RRSP GIC if interest rates should ever improve.


As I think you'll see from reading that article, interest rates usually improve when inflation goes up, so don't be fooled into thinking a higher-rate GIC is saving you more money. I'm old enough to remember when GICs were returning 10%, but inflation was running around 10% at the same time, so you were barely breaking even. The two have to be considered together. Today's 1% interest rates at banks like ING are actually giving you a better real return today than the 2 or 3% rates did a couple of years back. Just remember that interest rates mean nothing in isolation; you have to consider the inflation rate in order to determine if you're actually getting ahead.


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## Cal (Jun 17, 2009)

I would max out the RRSP's, and perhaps re-evaluate your current holdings.


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## osc (Oct 17, 2009)

Currently you can invest in long term Canadian government bonds with 4-5% return rate with very-low risk (XBB.TO). Basically the risk is lower than holding cash. Hold it in TFSA. Open a tfsa trading account with a low-cost online brokerage (like QuestTrade) and transfer your current 1%-yielding tfsa to that and buy XBB.TO. This could also serve as your emergency funds account. If you need the money you can get it out in a few days. 
Use the cash in hand in the same manner in an rrsp trading account (if you are in a medium to high tax bracket). 
Also, if you have time besides extra-cash, learn how to diversify your investments in order to optimize your return rate and risk.


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## ssimps (Dec 8, 2009)

osc said:


> Currently you can invest in long term Canadian government bonds with 4-5% return rate with very-low risk (XBB.TO).


I thought that the thinking was that if interest rates rise this year, then ETFs like XBB will be the first to be hit in terms of their share price dropping, because the underlying bond price will drop. So my understanding was that shorter term, maybe laddered, bonds were the way to go for lower bond risk for now until we know where interest rates stabilize.

Do you think that is incorrect?


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## HaroldCrump (Jun 10, 2009)

osc said:


> Currently you can invest in long term Canadian government bonds with 4-5% return rate with very-low risk (XBB.TO).


I often benchmark my fixed income investments against the highest yielding 5-yr. GIC rates.
Typically those are either from Credential or GICBroker.com
GICBroker is showing 3.50%.
Given that, 4% (or even 5%) doesn't excite me a whole lot, esp. since the moment interest rates start going up (mid-to-late 2010) the constituent bonds will experience capital loss.
Is it worth buying into XBB at this time?
I'm open to all opinions.


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## osc (Oct 17, 2009)

ssimps said:


> I thought that the thinking was that if interest rates rise this year, then ETFs like XBB will be the first to be hit in terms of their share price dropping, because the underlying bond price will drop. So my understanding was that shorter term, maybe laddered, bonds were the way to go for lower bond risk for now until we know where interest rates stabilize.
> 
> Do you think that is incorrect?


I don't think long term bonds will be affected in any way. Short-term, yes they will. XBB is the longest term.


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## dogcom (May 23, 2009)

Osc I believe you know that you must hold bonds to maturity to get the yield you paid for. So yes short term rates can rise fast but you don't have to hold them for very long until you can reset at a higher rate.


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## HaroldCrump (Jun 10, 2009)

dogcom said:


> Osc I believe you know that you must hold bonds to maturity to get the yield you paid for.


Actually, to get the "yield you paid for" you have to re-invest distributions at the same coupon rate as the bond, unless it's a 0 coupon bond.


osc said:


> XBB is the longest term


XLB is the longest term.


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## the-royal-mail (Dec 11, 2009)

Cal said:


> I would max out the RRSP's, and perhaps re-evaluate your current holdings.


The thing that bugs me about RRSPs is that the money is locked in and not easy to access. What if in the future I want to make a major purchase like a new car or a house down payment? At that point I will wish I had of placed the surplus money in something cashable.

Re-evaluate current holdings? Why? On what basis?


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## Four Pillars (Apr 5, 2009)

the-royal-mail said:


> The thing that bugs me about RRSPs is that the money is locked in and not easy to access. What if in the future I want to make a major purchase like a new car or a house down payment? At that point I will wish I had of placed the surplus money in something cashable.
> 
> Re-evaluate current holdings? Why? On what basis?


It's not really locked in. From a tax perspective withdrawing from an rrsp can be a negative if you are working but other than that you can withdraw as you please.

This is where some planning comes into play - either try to predict if you want to buy a car/house/cottage etc in the future or just spread your money around. Put some into an rrsp, some in TFSA etc.


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## Dr_V (Oct 27, 2009)

the-royal-mail said:


> What if in the future I want to make a major purchase like ... a house down payment?


As previously noted, you can withdraw money any time you like, but it may not be favourable to do so from a tax-perspective. That said, you can withdraw up to $20k per spouse without penalty under the first-time home buyer's plan.


K.


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## Four Pillars (Apr 5, 2009)

Dr_V said:


> As previously noted, you can withdraw money any time you like, but it may not be favourable to do so from a tax-perspective. That said, you can withdraw up to $20k per spouse without penalty under the first-time home buyer's plan.
> 
> 
> K.


Great point. I forgot all about the HBP. 

I think it might have been increased to $25k last year (from $20k).


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## ssimps (Dec 8, 2009)

dogcom said:


> Osc I believe you know that you must hold bonds to maturity to get the yield you paid for. So yes short term rates can rise fast but you don't have to hold them for very long until you can reset at a higher rate.


This is another point and related; if interest rates go up, you are taking risk holding long term bonds because you could be making less than the current rates. This is risk too. So people will start trying to dump the long term bonds (at less than what they paid likely) so they can get a higher rate will they not?

A laddered short term bond plan (1-5 years) will adjust itself to rate changes based on its design.

This is my understanding / take at least.

This is also all assuming rates will go up significantly, which I am not so positive about since have we really been seeing any improvement in business or employment conditions. Sock market yes, but what about street reality?


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## HaroldCrump (Jun 10, 2009)

ssimps said:


> This is another point and related; if interest rates go up, you are taking risk holding long term bonds because you could be making less than the current rates. This is risk too. So people will start trying to dump the long term bonds (at less than what they paid likely) so they can get a higher rate will they not?


Not necessarily, if they plan to hold the bonds to maturity.
The yield of such bonds will simply adjust to the new yields so that all else being equal, bonds of same credit quality and term will yield similar.
However, if someone is holding such bonds in the hope of trading for capital gains, then they'll be out of luck for a long, long time.


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## the-royal-mail (Dec 11, 2009)

Anyone have any other ideas? I haven't seen anything here that really jumps out at me and I'm projecting continued surplus in 2010.

Someone mentioned a plan. That is a good idea but being single and being relatively satisfied with where I am in life means that I'm not thinking in terms of a plan. It is true that this could help answer the original question in this thread but owning property is really something best done when in a marriage where two people can work towards paying for it and maintaining it. I've already done the rental property thing and that's also not in the cards for now. The only expense I'm anticipating in the future will be to replace my car. But what to do with the cash I'm saving between now and when I finally do buy a new car? Any other ideas would be great.


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## the-royal-mail (Dec 11, 2009)

Just to add, the past 3 years have been a lot of turmoil for me, moving halfway across the country, looking for a new job, apartment, packing, unpacking, racking up debt in the process, paying this back, some dental surgery and rebuilding rainy day fund. These were my goals over the past couple of years and these have all been accomplished. I had also wanted to complete some deferred car repairs and that has also been done. So I'm enjoying coasting for the time being, but while I'm coasting the cash is accumulating and am not sure what to do besides leave it as is. I don't get a lot of extra time off work so travelling and sitting on the beach isn't really on the radar. Maybe it should be haha.


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## Sampson (Apr 3, 2009)

I do not think you,ll get answer you are looking for. here is why.

People have already suggested the fixed icome route (high interest savings, GICs, bonds, etc.) but it seems you want higher returns.

This is where most people use exposure to equity markets to increase the chance of higher returns - however, you seem opposed to invewting in stocks.

So, the only way sround this is either change your expectations on return, or reduce your aversion to investing in stocks.

Why I put a big emphasis on making a plan is because you will find out exactly what rate of return on your investmrnts you NEED. Sure 1-2 percent returns are low, but if it allows you the freedom to live your life as you want, and sleep well at night (because you are not investing in stocks), then just put your money where it is safe and do not sweat the low rates of return.

If you don"t need/want to invest


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## the-royal-mail (Dec 11, 2009)

Thanks Sampson. I think you're right. I'm thinking I'll try some cashable GICs at my regular bank, I'll put the money there for the time being and watch the markets. If the rates increase then I should be able to cash out the GICs and buy new ones at the higher rate. I'm guessing the bank won't mind that. Hopefully they don't charge fees or have some weird rule against doing that. I have been watching interest rates so I didn't have to bother flipping GICs in this manner though, as the short term gains for this money in low interest really don't inspire me to want to act if you know what I mean. This is actually the first time in my life I've had to deal with this sort of a situation. It's actually kind of nice for a change but leaves me a bit clueless at times. Seems I'm far better at saving than investing.


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## Sampson (Apr 3, 2009)

My suggestion would be to look/read into portfolio asset allocation. 

You have a reasonable amount of money that could be invested, and some exposure to equities could help boost the returns on your money, meanwhile, a very high % allocated to cash, GICs, bonds would help drastically reduce your risk.

You might start at 10-30% equities, and keep the remainder as cash/bonds. A single ETF like VTI could give you ample diversification, minimize trading costs etc.


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## hboy43 (May 10, 2009)

Hi:

May I suggest that your RRSP experience of turning $11K into $8K over a decade has cost you much more that $3000. It has cost you the temperment to be in the historically highest returning asset class, a cost that will likely be far more than $3000 as the future unfolds.

Every day is a new day with new opportunities. You need to make decisions based upon how you find the world today, not the way the world was in the past.

An example from our portfolio. We were the proud owners of 1800 shares of MX which used to trade as high as $33 or so. One day they were trading at about $19, so a nice fat loss from $33. Yea, but so what. Is it a good company making a saleable product? Still paying a dividend? OK, so I bought another 500 shares. Same story a while later, another 700 shares at $17. Well more time goes by and it is in the $8 range. Now I have lost real money as the ACB is about $11 (been a holder about 15 years). A new day with new opportunities: another 1500 shares at about $8.

Well time went by and the world didn't end. I recently returned 500 shares to Mr. Market at near $21, so 4000 shares remain.

Similar story for GE, NBD, NCX, RUS, BBD.B, the banks.

Nobody says you have to invest a quantity of money one day, hold for 10 years, and then discover that you have a loss. You had the opportunity over that decade to do what I did, by more of what you already had, and loved, and lost money on, AT A FANTASTIC PRICE! 

What the index has done in 10 years is irrelevant, it is what you do when you wake up and say "It is a new day with new opportunities". Waking up today one finds stocks with yields like:

BMO 5.2
BNS 4.2
BBD.B 1.9
CM 5.2
HSE 4.0
IGM 4.9
JNJ 3.1
MX 2.7
POW 4.0
RUS 5.3
T 5.6
TRP 4.3

and hundreds of others. As good as 9 months ago? No. But what are the competing opportunities today? Will they be better than a GIC at 1% 10 years out? Who knows, but I like the chances.

One other comment I'd make. I have been investing on my own for close to 30 years now. I would argue that it is not any one style of investing that loses people money, it is all the bouncing around people do when things are currently bad. They tend to harvest the bad of all styles without waiting for the good. So they lose money is real estate, then switch to stocks. Lose money there, then go fixed income, but are thrashed by inflation. I was/am a 100 percent stock man with leverage. If I had changed styles this past March to fixed income, I'd be down massively now.

hboy43


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## the-royal-mail (Dec 11, 2009)

hboy, your post starts out in apparent agreement but then you suggest I should simply forget about the past and continue taking chances flipping money around. Waking up with new opportunities? Huh? 10 years is a very long time and I've effectively broken even over that time (well actually I'm still $2500 behind) - on one hand you say that I've lost more than $3K and OTOH you go on to describe an investment strategy that may provide great short term returns but for which you still end up losing money. How is this a good thing? If I've lost about 15% over 10 years, what indication is there that I will make money by the time I retire? 10 years is not exactly a short span of time! Judging by the past is very necessary. We need to look at historical context to understand many things that happen today.

I'm really sorry if the problem is with my understanding but your post just doesn't seem to make any sense to me. It's almost laughable actually, but again maybe the problem is with me. Can anyone else try and make sense of what hboy wrote? And does anyone agree with it?


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## Rickson9 (Apr 9, 2009)

the-royal-mail said:


> Can anyone else try and make sense of what hboy wrote? And does anyone agree with it?


I understand what he wrote. I also agree with it. From reading his posts I invest in a similar manner. Not many people invest like this; probably 5% of the population.


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## Spidey (May 11, 2009)

Being in your mid-30s, you still have quite a bit of time to grow a portfolio. It would be well worth it for you to invest some time to education. May I suggest (preferably in this order):

Investing for Dummies by Eric Tyson (take no insult from the title it is a good book)
The Intelligent Asset Allocator by William Bernstein
The Four Pillars of Investing by William Bernstein
Stocks for the Long Run by Jeremy Seigel


If you read these books, you will probably know more about investing than 90% of the population. All these books should be available at your local library.


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## montyloree (Jan 16, 2010)

Just a quick opinion...
My financial advisor once told me about the 3 layers of savings...

1) Emergency Savings
6 months worth of savings to cover all of your bills. If the window gets smashed etc.. It's the emergency cushion

2) Intermediate Savings
This could include Car purchase, furnace, roof etc... things that cost , but you only do every 5-10 years.

3) Long Term Savings
Obviously for retirement...

Each of these are buckets that need to be filled, and all have different priorities.
Emergency savings should be kept in a very liquid savings account. You need to get at it right away.
Intermediate is a little less liquid... IE.. don't put it in an RRSP that is locked in for 5 years at a time
Long Term... this is where you can lock in funds and forget them for years.

so... it all depends what your goals are, and which of these buckets you're trying to fill up


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## Berubeland (Sep 6, 2009)

*Emergency savings should be kept in a very liquid savings account.*

Or even a TFSA....


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## ssimps (Dec 8, 2009)

Berubeland said:


> *Emergency savings should be kept in a very liquid savings account.*
> 
> Or even a TFSA....


With rates as they are, I'd say emergency savings should be $0 and instead have a LOC that you can use in an emergency. Why have 6 months of pay sitting making nothing in the case of an unlikely emergency? Waste of resources to me.

If I did have 6 months of income sitting, I;d view it as a 'stock market correction' account, more than an emergency savings account.


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## Oldroe (Sep 18, 2009)

My emergency fund is a credit card and a line of credit. If every necessary it will get me the 14-30 days to access other funds.

I've even max my credit card and line of credit to invest and payed it off when a GIC matured.


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## the-royal-mail (Dec 11, 2009)

montyloree said:


> Just a quick opinion...
> My financial advisor once told me about the 3 layers of savings...
> 
> 1) Emergency Savings
> ...


This is excellent advice IMO and consistent with my philosophy. And really, that is what I am doing. I guess I have money for items 1 and 3 and am in the process of saving for item 2 right now.

monty, where do you or your advisor recommend the money for item 2 go? TFSA or other liquid savings account is bang on for item 1 but the money in 2 can probably be in a cashable GIC or some such thing?


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## the-royal-mail (Dec 11, 2009)

Oldroe said:


> My emergency fund is a credit card and a line of credit. If every necessary it will get me the 14-30 days to access other funds.
> 
> I've even max my credit card and line of credit to invest and payed it off when a GIC matured.


Thanks for the reply oldroe. Respectfully though, I have to say that I seriously disagree. Here's why. I have a weakness of it taking me up to 12-15 months to find a new job when adversity strikes. Getting a job is a very difficult and exhausting process, even with all the networking and interview and resume polishes in the world. And it's a weakness I have, for whatever reason. The last time adversity struck, I had about $12K in cash savings plus UIC. Within 7-8 months that was all used up (a $5000 move was also part of that) and I was accessing LOC, which had a limit of $15K. 4-5 months later I ran out of LOC and was about to start using CC when I got my break. I even had to borrow from family to buy a car to get to a temporary job which did not have bus service at the hours and location in question.

I had racked up $23K of debt plus used $12K of savings and exhausted UIC and this took me about 1 year to pay off afterwards. That was a year ago and now I have built up what I had before plus more. I was running out of available credit!

So as you can see, had I of relied of LOC and CC and other debt instruments to carry me through there is no way I would have made it. The interest costs would have been significant and I would have been at the mercy of lenders. We do not know how life will go and the idea with the 3 tiers of savings as monty described above is about the best way we humans can protect ourselves from adversity. Relying on debt IMO is why our country is now in such a financial mess!


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## Oldroe (Sep 18, 2009)

royal your back up plan must be tailor for you as mine is tailor for me. 

The only wrong thing is no backup plan.


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## the-royal-mail (Dec 11, 2009)

This is an update to let you all know that I have decided to go with monty's 3-tiered structure on a more formal basis. Although I had been roughly doing that, it wasn't "officially" structured this way. I have also considered the other opinions in this thread. Here is where I stand:

$10K currently in item #1, stored in 2009 and 2010 TFSA account.

$8K currently in cash for item #2, need to figure out best way to deal with this over the long term but for the next year or so I may want to buy a new car. So my savings will be earmarked to item #2 to allow me to buy the car with cash, and make up the balance with LOC. This will be better than getting a car loan since it will allow me to pay off the LOC debt quickly as extra funds allow. There is no timetable for this but am hoping to keep my car at least another year, God willing. And the car purchase is by no means a final decision at this point. If I ultimately decide against it, some of the money I save in this bucket will probably be placed into a cashable GIC in 12 months, if the interest rates improve between now and then. Also, some of the money from this bucket will be used in 12 months to fill up my 2011 TFSA allocation, giving me $15K in the rainy day cash fund.

Item #3 already has some money from the past 10 years but my RRSP allocation is by no means exhausted. So, if the car purchase does not happen I may take some (half?) of the money from saved into bucket #2 by next December and allocate it to RRSPs, in the form of GICs most likely. There's enough money in risky/aggressive mutual funds already in the RRSP so I don't wish to do any more of that for the moment. Some of the remainder of the money would then go from bucket 2 into bucket 1 TFSA 2011 as mentioned above and the remainder would sit in bucket 2 to help beef up that bucket. Hope that doesn't sound too convoluted.

Future and continued savings will continue to accumulate in my regular bank account, or bucket #2 if you will, then shifted around to the other two buckets with the passage of time. I have set goals for the three buckets as well: 1: $20K or more, 2: $20K or more and 3: RRSP contribution limit maxed out (this will take a very long time and buckets 1 and 2 get highest priority because they are life emergency/contingency funds).

Any comments/objections?


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