# GIC, RRSPs, TFSAs, HEEEELLP!



## kl1618 (Sep 21, 2012)

Ok, here is our situation. I am a nursing student, soon to be graduated in 1.5 years at which point I will join the full time work force (oh joy!). My partner makes around $80,000/year. He does not like money talk, and until I came along had been accruing credit card debt. He struggles with anything to do with money -- he is one of those! Luckily, he makes enough money to make some hella payments, so I got that whole debt thing sorted and we are debt free (discounting my student loans...rats!)

We have $25,000 in the bank just sitting there. And my partner has $10,000 in RRSPs.

We are not wanting to make any big purchases in the next year, so I think we should put our money away into savings. But I don't want the majority of our money to be locked away for a number of years because we want to buy a house within the next 5 years.

Can you suggest how much we should be put into a mutual GIC? We could easily put away for a 1 year GIC, but should we leave our bank to find a better rate? How much should we put into Tax Free Savings Accounts? How much should we contribute to RRSPs? My partner has not been contributing as much as he could to his RRSPs, so this year he can contribute a lot, up to the tens of thousands I believe. This is all so much to consider!

I could really use some ideas. Thanks so much!!!


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## Sherlock (Apr 18, 2010)

GICs are not very popular on this forum, there's no point in locking your money in a GIC when a high interest savings account can produce the same interest as a GIC. Since your time horizon is 5 years I would suggest that you can take some risk and put your money into some low risk stocks or ETFs, something that will produce income while appreciating. Maybe a dividend ETF like XDV or ZDV, or maybe some safe stocks like one of the big banks and telecoms. There is really no way you can even beat inflation with a savings account or a GIC, and worrying about a 0.25% difference between one GIC and another to get an extra few dollars a year is not even worth any effort. Also since you are saving for a house it would be a good idea for you each to put at least 25k into your RRSPs so that you can take advantage of the government's homebuyer's plan.


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## VJ99 (Apr 24, 2012)

Good advice Sherlock.
Dividend-paying stocks are the best choice at this time and both the ETFs you mention are solid choices.

kl1618 - you might also consider adding a US Equity ETF, something like the iShares S&P 500 ETF (XSP).

If you are not ready to open a self-directed RRSP, then there are good mutual fund equivalents.
Take a look at this: http://www.tdcanadatrust.com/products-services/investing/mutual-funds/prices-EF.jsp
From that list, I'd say the "TD Canadian Index" and the "TD US Index" would be good, cheap choices.


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

Welcome to the forum.

I do not agree with the idea of taking equity risk with money that will be needed for a house DP in the next little while. This money should be placed in a HISA as suggested above. I think Sherlock has the right idea. HISA is much more flexible but keep in mind you will pay tax. Perhaps just deposit a cash balance in your TFSA, you'll probably gain about 1.15% per year, there will be no tax payable on the gains and you can withdraw the cash anytime you want.


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## OhGreatGuru (May 24, 2009)

I agree with the-Royal-Mail. In spite of the pitiful interest rates I wouldn't put your short-term savings into equity when you are planning to buy a house within 5 years. 

FYI a "TFSA" can be invested in pretty much the same range of financial instruments as an RRSP. So you should both open TFSAs immediately at an institution that offers various investment choices for TFSAs and move as much of your savings account into them as you can, whether you decide to invest it in GIC's or HISA. It will at least save you from paying taxes on the interest earnings.


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## crazyjackcsa (Aug 8, 2010)

Gotta go with TRM, "a house within 5 years" could mean anywhere from tomorrow to Sept. 2017. Hate to lose any capital in that time. Slap it into a TFSA with a HISA.


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## PrairieGal (Apr 2, 2011)

Canadian Direct Financial is 3% on their TFSA. https://www.canadiandirectfinancial.com/Personal/Investments/TFSAs/KeyReachTFSASavings/


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## VJ99 (Apr 24, 2012)

If everyone's a bear, is it time to be a bull?
What ever happened to be greedy when others are fearful?

From all the responses, if there was such a thing as a Canadian Money Forum Bear/Bull Indicator, it would certainly be flashing a Buy signal.


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## Four Pillars (Apr 5, 2009)

archerETF said:


> If everyone's a bear, is it time to be a bull?
> What ever happened to be greedy when others are fearful?
> 
> From all the responses, if there was such a thing as a Canadian Money Forum Bear/Bull Indicator, it would certainly be flashing a Buy signal.


Archer, you might want to reread the original post. They indicated that the money is to be used to buy a house within five years. Are you really advocating equities for that kind of time frame?


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## CanadianCapitalist (Mar 31, 2009)

Since OP wants to buy a house within the next 5 years, I agree with the recommendation here that savings should be invested very conservatively in cash and GICs. They should maximize RRSP contributions so that they can tap into it through the home buyers plan later. As soon as the RRSP balance is around $25K, rest of the savings should go into TFSAs which can be withdrawn anytime for a down payment.


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## Sherlock (Apr 18, 2010)

When I was a new grad I thought I would buy a house within 5 years too. Guess what, it didn't happen. She THINKS she will buy a house in 5 years, who knows if she will. What if she ends up not buying a house for another 15 years? Should she miss 15 years of compound interest? If you avoid equities because you think you might need that money at some point in the future, you'll end up never investing because there will always be something right around the corner that you think you need to save for and therefore can't risk any capital loss.

I'm also saving for a house (with no specific target date set) and I'm 100% in equities. In the unlikely event my portfolio plummets, I'll just delay my house purchase until it rebounds.

Now if you've set a concrete date to buy a house and that date is not too far away, then that's different, you shouldn't take any risks with that money.


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## crazyjackcsa (Aug 8, 2010)

When I was a new grad, I didn't think I'd buy a house in five years and did, and got married and had a kid. What's your point? In 2004 I told my wife she should invest a sizable chunk of change into the market, she didn't. We bought a house in 2008. Dodged a bullet there.


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## lonewolf (Jun 12, 2012)

Hi, KL

Hope everything will work out for you. Iam not sure what you mean precisely by your partner. When someone showed they had no respect for sacred money in the past. I would not purchase a house with them untill enough time went by to show they changed. If you guys cant talk about money easily then you got a problem & there is no way I would ever want to buy a house with someone that didnt want to talk about money. Maybe try counciling because the problem will get worse. Why does he not want to talk about money ?


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