Under the mattress
March 23, 2013 11:40 AM   Subscribe

Where to put this $40,000?

I have $40,000 that is sitting in my Canadian bank account, and I don't think this is the right place for it.

My freelance revenue fluctuates wildly month to month, so sometimes I need to dip into this reserve to pay the bills or for travel. My RRSP and TFSA are maxed out. Is there somewhere that makes sense to put this cash, that is making some interest, and is easy for me to access?
posted by miles1972 to Work & Money (6 answers total) 11 users marked this as a favorite
So it doesn't sound like you really want to put it at risk with a market fund.

You've probably realized there is a narrow intersection of "no risk" "making some interest" and "is easy to access". How many month's expenses is that $40k for you? Whats your current rate on your savings account?

You might want to look into a "high yield savings account". There are some in the .8 to .1%APY range. Some have fees and min. balance requirements. Not awesome, but probably better than what you've got currently.

A CD ladder might be a good secured investment but it takes a bit of maintenance. Rates aren't great right now, of course. You could structure it so that you always had 1 months expenses become mature each month. At the end of the month, you buy a new CD with what is left, just as a old CD becomes mature. Here's a (dated) explanation of how to set one up. (The procedure is accurate, but the rates have gone way way down.)

Plus CDs can be broken into early, usually just by forfeiting your gains, (but obviously read the fine print).
posted by fontophilic at 12:08 PM on March 23, 2013

There are no CDs in Canada, alas. But. Could you potentially do the CD ladder thing with GICs?
posted by Miss T.Horn at 12:53 PM on March 23, 2013

Came in to suggest a GIC ladder.
posted by backwards guitar at 1:01 PM on March 23, 2013

It'll also depend on how much of that $40K you would need immediate access to and how much can wait for more than a week. $40K sounds like a lot for a freelancer's working capital.

Look at previous expenditures and figure out a comfortable amount that would would need immediate availability. Park that in a chequing account that gives you perks for large amounts. For example, TD's Select Service account which throws in a high end travel Visa and USD banking services.

Deposit the balance into a) a non-registered trading account and invest in a money market mutual fund (no commissions and settles next business day), b) into a GIC ladder, or c) into a plain, longer revolving GIC. This would depend on how much advance notice you think you'll get if you need to dip into this portion of the fund.

Given that your RRSP and TFSA accounts are maxed out, I wouldn't bother trying to invest the $40K in any way other than to keep up with inflation.
posted by tksh at 4:11 PM on March 23, 2013

Do you need all of it to be liquid, or just a certain percentage of it?
posted by Dansaman at 9:19 PM on March 23, 2013

I probably comfortably only need $5k to be liquid at any given time.
posted by miles1972 at 10:31 PM on March 23, 2013

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