The Frugal Canadian

A frugal spender seeks to find new ways to save money and increase her net worth.

Wednesday, March 01, 2006

Too Much Cash

I have $10,000 in my savings account right now. I'd like to keep at most $5,000 in cash realizing that I am sacrificing a potentially higher return if I keep more than 2 months of living expenses in cash. The consequence of saving $2100 each month is that every 2 months I need to look for an investment option that is going to earn me a decent return. In the next 6 months to a year, I am expecting to have some large purchases as I get closer to buying a home and will have to start shelling out some cash for my upcoming wedding. I'm therefore looking for a liquid investment, with an investment horizon of 6 to 9 months. I'm not considering ETFs other other equities given the short time period, and there is a great risk that I wouldn't even recover $29 in and out brokerage fees.

Some options I have:
- Current PC Financial Account - paying 2.9% interest - no liqudity restraints
- ING Savings Account - paying 3% interest - no liquidity restraints
- 90 Day ING GIC - 3.4% - low liquidity restraint
-180 Day ING GIC - 3.5% - medium liquidity restraint with only a 0.1% benefit
- Bankers Acceptances - 0 to 90+ days - 3.25% to 3.55%
- T bills - 30 to 90 days 3% to 3.4%
- Corporate Bonds - GM Mtge Note Bond, 3.8% 9/22/06 with a yield of 7.314%.
- Other corporate bonds with Dec 2006 maturity - 3.6% - 3.8% yield

Basically, on what I would call the "safe" investments I'm goign to get 3 to 3.5%. Clearly nothing to get excited about. But, I'm getting nervous even thinking about investing in GM even the yield is definitely attractive. It has a BBBl DBRS rating and Ba1 Moodys rating. Do I think they are going to go bankrupt by September? Probably not, but I don't think I'm willing to take the risk. For now, I will put the money into my ING account and continue to look for a better alternative.


At 8:54 PM, Anonymous Anonymous said...


Have you looked into the Achieva high interest savings account? Redflagdeals has a comparison of the high interest savings accounts.

My pick is Achieva. It has the highest interest rate of 3.5%, and you can deposit at most credit unions for free.

Also, you can withdraw once per month for free, no minimum. I'm opening mine later this month.

At 9:35 PM, Anonymous Anonymous said...

Also - have you looked at the Altamira Cash Performer. It's a mutual fund - but it provides a return similar to an excellent savings account - and is no load.

This is where I'm parking my money (as I don't want the hassle of setting up another savings account elsewhere)

At 10:30 PM, Blogger The Frugal Canadian said...

Thanks for the ideas. While the Achieva account looks appealing, I'm hesitant to set up yet another bank account(i'm already at 3 institutions).

I'm definitely interested in the Altamira cash account(both the Cdn and US). Since these can be purchased easily from my trading accounts with no brokerage fees this seems like a great no hassle solution. Actually, a client of mine invests in it and at the time I was reviewing their accounts, I intended to read up on it for my own personal accounts. Thanks for the reminder!


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