Tax Free Interest Accounts

[saskatoonlady2004]

Does someone have advice about opening an account, in particular who has the best deal, good or bad experiences? Maybe a comparison chart to make it easier to choose. Thanks for any and all help.

[MortgageQueen]

If you are ready to open a TFSA, then you are ready to talk to a Financial Advisor. There are a lot of options out there and many ways to shelter your tax dollars as well as invest. It's Totally worth it!

[aemi]

Peoplestrust.com - TFSA 3% constant for over 2 years, one of the highest atm.

[ashedfc]

Does someone have advice about opening an account, in particular who has the best deal, good or bad experiences? Maybe a comparison chart to make it easier to choose. Thanks for any and all help.

What do you mean by "Best deal".......... this has a different meaning for different person. for some 2% return is good; & for some even 10% return is not good (they want more).
& there's nothing as Good or Bad, it differs from individual to individual & based on circumstance. Its you who have to decide "What's your good or bad"

Look at the broader prospective & evaluate your situation, you will find out "What's good for you"... sometimes a "zero percent" return is also a good thing. Specially when you are concerned about "Return of your money" as compared to "Return on your money"

For example; you go to the Dr asking for treatment for headache, & after complete/thorough check up, its found that the headache is due to high blood pressure, & the treatment recommended is for high blood pressure (I mean the treatment has no direct correlation with headache but it disappears permanently within couple of weeks)........ so I would suggest do a thorough check up of your financial situation & than proceed..

[Gsxrboy]

To answer your main question, check out moneysense website for a list of financial institutions and their interest rates for savings accounts.
http://www.moneysense.ca/saving/

I would like to add my 2 cents as well on savings. If this account is for an emergency fund, then yes, look for the highest interest rate you can find. However, if this is for a possible retirement fund, then 3% will not get you there. A simple calculation you can use to find out when your money will double is 72 divided into 3 which equals 24. Which translates to about 24 years your money will double. Something to think about when you are saving your money. Obviously speaking to an adviser both at a bank or other institution will help you develop a plan and prepare for the future.

Good Luck

[theweaves_dad]

Better option, send it all to me. You will not get any interest, but at least I will be happy! *LOL*

[ashedfc]

The initial post isn't asking "where to donate money" With no intentions of getting anything back..

[tjthemanto]

Does someone have advice about opening an account, in particular who has the best deal, good or bad experiences? Maybe a comparison chart to make it easier to choose. Thanks for any and all help.

For TFSA you need not have just a savings account , you can have GIC , Stocks , mutual Funds , bonds etc in your TFSA also.

Right now the interest on most savings accounts is dismal so if you are willing to take some risk having a few other investments like mutual funds , stocks etc might give you a better return , but its risky and there is no guarantee

Most savings accounts and GIC interest rates are barely keeping up with the inflation , your money actually loses value in them day by day although it looks like you are getting atleast some interest.

[ashedfc]

For TFSA you need not have just a savings account , you can have GIC , Stocks , mutual Funds , bonds etc in your TFSA also.

Right now the interest on most savings accounts is dismal so if you are willing to take some risk having a few other investments like mutual funds , stocks etc might give you a better return , but its risky and there is no guarantee

Most savings accounts and GIC interest rates are barely keeping up with the inflation , your money actually loses value in them day by day although it looks like you are getting atleast some interest.

Absolutely true, You are 100% correct.. with a GIC/ or an interest bearing account, one can see some interest added into the invested amount, but if you calculate the overall value (purchasing power) of the net (principal+interest) amount, in reality you have actually lost money.
For example $1000 invested at 2%, gives you $1020 at the end of the year (a little bit more if you add compounding of interest if there's any); so after 365days (or 1yr) you have $1020; however, what you could purchase with the $1000 one year before is now costing more than $1020, or you are unable to purchase the same stuff, which you could purchase 1yr before. This is called loss of purchasing power. here even though you have gained some interest, it has not kept pace with inflation (thereby making you more poorer).

How do you avoid this: Invest in assets which grow more than inflation.

That doesn't mean GIC's are not good investment. They are very good in a deflationary environment, where prices are falling, & your assets are growing. But the biggest problem with deflation is "Central banks control the money supply; we live in a world where money is digitally controlled; any amount of money can be added into circulation, with a click of a computer button".. this is exactly whats going on since Aug 2007 (when this current financial crisis actually started). Central banks worldwide are adding more & more money into the system to prevent any further deflation; & it has now turned the other way - so much so, that, now we have high inflation & its gaining momentum day by day heading into even higher inflation. The new money which has been added in the recent past & being added almost every week, will trigger massive inflation in the near future.. Its already visible to those who visit grocery stores (prices have already started going up like crazy) & its just the beginning....... the more they print the more it happens..

So position yourself to protect from inflation...
Nominal gain of couple % interest is not real gain. Real gain is only considered when you minus the inflation rate from your rate of return.

Real Return = Interest Rate - real rate of inflation.. (not what the govt declares; because govt inflation data excludes food & energy which is hit the most)

So for example lets say you get 3% interest rate & real rate of inflation is 4% (if you include food & energy; I would bet its even more; but for argument sake lets take 4%)

So your Real rate of Return is 3-4 = -1;
which means in spite of getting a 3% interest return; you have lost 1% of your money.....

Many of us only look at the interest rate (but what good is an interest rate, when its unable to protect the value of money)....

Read this when you have time http://www.chrismartenson.com/blog/g...nflation/73670

[Carlotta]

When I try and explain inflation to my clients, I try and put it into simple terms:Let's say you want to buy a case of beer. Right now it would cost you roughly $30. Take that $30 and put it in an old tin can and bury it in the back yard. Now... in ten years, go out and dig it up. Do you think that you will be able to take that $30 to the beer store and still get a case of beer with it?That is the effect of inflation on your money.And tjthemanto is correct.... why waste the opportunity in a tax free savings account by just leaving it in a low interest savings account? The government should have named it a tax free investment account instead because people get confused. You can use your TFSA to invest in any type of investment that you can hold within your RRSP.... GIC's, Mutual Funds, Stocks, Bonds, etc.And PLEASE make sure you name a beneficiary on your account, and PLEASE don't just randomly take money in and out of it.

[ashedfc]

True, if you stash money into an interest bearing account..... you will get nothing & with that kind of return you will reach nowhere.

as compared to parking your assets in Gold (as Gold is best inflation hedge & an ideal store of value; thats why Central banks store gold in their vaults): its has more than doubled in the last 3years (& now today IMF announced they raised 480billion $$ of new money from somewhere; inflation is bound to accelerate in the future...

Check this price chart of Gold.. (since Oct 2008, Lehman Brothers bankruptcy) it has maintained itself as a store of value & as long as central banks continue to print money; it will continue to do so in the future.

[ashedfc]

This is the reason of the inflation & loss of value of money (which is the direct result of inflation)...
In the last 20yrs chart of US Dollar (the world reserve currency).. ,... see how it has lost value since 2001 (9/11event).... its expected to continue & even accelerate going forward.

[sugarbb]

Absolutely true, You are 100% correct.. with a GIC/ or an interest bearing account, one can see some interest added into the invested amount, but if you calculate the overall value (purchasing power) of the net (principal+interest) amount, in reality you have actually lost money.
For example $1000 invested at 2%, gives you $1020 at the end of the year (a little bit more if you add compounding of interest if there's any); so after 365days (or 1yr) you have $1020; however, what you could purchase with the $1000 one year before is now costing more than $1020, or you are unable to purchase the same stuff, which you could purchase 1yr before. This is called loss of purchasing power. here even though you have gained some interest, it has not kept pace with inflation (thereby making you more poorer).

How do you avoid this: Invest in assets which grow more than inflation.

That doesn't mean GIC's are not good investment. They are very good in a deflationary environment, where prices are falling, & your assets are growing. But the biggest problem with deflation is "Central banks control the money supply; we live in a world where money is digitally controlled; any amount of money can be added into circulation, with a click of a computer button".. this is exactly whats going on since Aug 2007 (when this current financial crisis actually started). Central banks worldwide are adding more & more money into the system to prevent any further deflation; & it has now turned the other way - so much so, that, now we have high inflation & its gaining momentum day by day heading into even higher inflation. The new money which has been added in the recent past & being added almost every week, will trigger massive inflation in the near future.. Its already visible to those who visit grocery stores (prices have already started going up like crazy) & its just the beginning....... the more they print the more it happens..

So position yourself to protect from inflation...
Nominal gain of couple % interest is not real gain. Real gain is only considered when you minus the inflation rate from your rate of return.

Real Return = Interest Rate - real rate of inflation.. (not what the govt declares; because govt inflation data excludes food & energy which is hit the most)

So for example lets say you get 3% interest rate & real rate of inflation is 4% (if you include food & energy; I would bet its even more; but for argument sake lets take 4%)

So your Real rate of Return is 3-4 = -1;
which means in spite of getting a 3% interest return; you have lost 1% of your money.....

Many of us only look at the interest rate (but what good is an interest rate, when its unable to protect the value of money)....

Read this when you have time http://www.chrismartenson.com/blog/g...nflation/73670

how do i find out the inflation rate??

[tjthemanto]

how do i find out the inflation rate??

http://www.tradingeconomics.com/canada/inflation-cpi

Currently the inflation rate in Canada is around 2.5 % to 3 % .

The Consumer Price Index from Stats Canada also gives a good picture.

http://www.statcan.gc.ca/daily-quoti...20420a-eng.htm

[ashedfc]

http://www.tradingeconomics.com/canada/inflation-cpi

Currently the inflation rate in Canada is around 2.5 % to 3 % .

The Consumer Price Index from Stats Canada also gives a good picture.

http://www.statcan.gc.ca/daily-quoti...20420a-eng.htm

I agree, Stats Canada is on place where you get the inflation numbers... but this is the number what Govt. publishes. And its not the correct number.
Over the recent years Govt. has changed the way inflation is calculated & reported. Its being grossly understated.

All benefits/pensions are tied to inflation, so its helps the govt...
As a responsible individual, its in your best interest to find out what the real rate of inflation is; & invest/plan accordingly to stay ahead of the inflation.