Tuesday, October 23, 2012

Where to save my Emergency Fund

I know GICs are not sexy, and ING does not always offer the best interest rate out there.  However, the reason why I have a chunk of my TFSA (aka my emergency fund) at ING is because they have these specials rates that comes up once in a while.   For example, every year around the October they offer a TFSA Kickstart account, where you can put in the money you want to contribute for the next year’s TFSA, and they give you double the interest rate until January at which point it gets put into your actual TFSA.

Also right now, they are offering 2% on their 1 year GIC (it can be RRSP/TFSA/Non-registered), which is the same rate for their regular 3 year GIC.  I move part of my TFSA into this.  I understand that it needs to be liquid because it’s an emergency fund.  However, in the 5 years that I have had an emergency fund, I’ve used it once ($2000 this year for renovation at one of the rentals).  Therefore , it’s likely I won’t need to cash all of my TFSAs at once.   And the early withdraw rate is 0.5% if I really, really need to.

If you don't like to watch for these special rates and offers, Canadian Tire Financial offers pretty good rates in general.  i think right now it is offering an interest rate of 1.8% vs. ING's rate of 1.35% for their regular high interest savings account.

So consider using ING or Canadian tire for things such as Emergency funds, which you may need to access in a hurry, but not on a regular bases.