In a trade war with no end in sight, having cash parked safely in savings is smart personal finance.
I know a lot of you agree after reading the latest money flow numbers from consultants McVay and Associates. Demand deposits – money in savings and chequing accounts – grew by 6.9 per cent in March on a year-over-year basis.
A year ago, with interest rates falling, balances in demand deposits were down 4.4 per cent. Rates continued to decline since then, but people seem to be OK with that because of the trade war and the resulting economic uncertainty.
Interest in guaranteed investment certificates is definitely waning, though. The McVay numbers show a 0.8-per-cent decline in term deposit balances in March, which compares with a year-earlier jump of 18.9 per cent. GIC rates now top out in the 3.5 to 4 per cent range at alternative banks, and 2.5 to 3 per cent at big banks. If you bought GICs when rates were in the 5 to 6 per cent range, today’s returns look weak.
The true gauge of the value in savings rates is the real rate of return, or what remains after inflation. The cost of living increased by 1.7 per cent on a year-over-year basis in April – that’s the hurdle you should be clearing with the rate you get on your savings.
A thought on squeezing more interest from your savings with no additional risk: Try a notice savings account, where you agree to give your bank advance notice of something like 10 or 30 days before making a withdrawal.
The 2025 Globe and Mail ETF Buyer’s Guide
For more than a decade, I have put together an annual guide to help investors find the right exchange-traded funds for their portfolios. There are six instalments each year covering Canadian, U.S. and international equity funds, Canadian dividend funds, bond funds and asset allocation funds, which offer a fully diversified portfolio in a single product.
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Rob’s personal finance reading list
Retirement’s blank slate problemA call to look past the money side of retirement and think about how you want to spend your time. What you want to avoid is a blank slate, a.k.a. the “endless Saturday trap.”
The American debt spiralAn explanation of how the economic policies of U.S. President Donald Trump and starting to produce higher interest rates. With the economy slowing on both sides of the border, higher rates are not helpful.
Seven myths about foodLots here to chew on for people who want to get the most value out of their grocery spending, including the supposed benefits of searing meat to lock in the juices.
Callout
Globe and Mail reporter Salmaan Farooqui is looking to speak to renters who are moving to find a better deal after signing their leases when rental rates were at their highest a couple years ago. Average rents in cities such as Toronto and Vancouver have declined for roughly two years since their peaks, and we’re wondering if you’re finding noticeably better deals. Reach out to
sfarooqui@globeandmail.com if you’d like to share your story for an article.
From our readers
Ask Rob
Question
Does it make more sense to pay off your mortgage or invest in a revenue property?
Rob says
For now, I prefer the pay-down-your-mortgage option for a few reasons. One is the guaranteed benefit of paying off a mortgage in the form of eliminating interest costs and debt. Another is the uncertainty of investing in property right now. Home sales have slowed as a result of the trade war, and continued weakness in the job market suggests potential for a longer slump. Meantime, mortgage rates are still above 4 per cent for the most part. If housing tanks and interest rates come down, then that’s an opportunity to buy an investment property.
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