By far the easiest and simplest way to invest is to open a savings account.
As a novice investor, your primary concerns are probably:
1. Protecting your original investment
2. The freedom to use your money when you need it
With a savings account, the money you put into it is always safe. Even in the highly unlikely event your financial intuition goes bankrupt, the Canadian Deposit and Insurance Corporation insures your balances up to $100,000. However, since there is almost no risk in having a savings account, your return is isn’t very much. Right now, the interest rate will be in the vicinity of 3.0-3.5%. But hey, that’s better than keeping your hard earned cash in a chequing account that earns almost no interest if not zero.
Now before you head to your bank and open one of their savings accounts, keep in mind that not all are created equal. Some require account minimums to get a decent rate or they may bombard you with fees. You should shop around to ensure you get the best rate and find the best features that meet your financial situation. Below are two that I recommend checking out.
Investment Savings Account
ING Direct Canada
current rate: 3.00%
ING Direct has been in Canada for quite a while now. You’ve probably seen their commercials with the Dutch walking around telling you to “save your money”. I like ING Direct because you get the same, high rate of interest whether you have a balance of $1 or $100,000. There are no maintenance fees or transfer fees. Plus you have access to your money whenever you want. The only drawback is that your ING Direct savings account needs to be ‘linked’ to an existing chequing account at a bank so that you can make deposits and withdrawals – which take about two business days. If you’re just looking to set money aside for a rainy day, then ING Direct is a good choice.
Interest Plus Savings Account
President’s Choice Financial
current rate: 3.05% on the entire balance if you have a minimum account balance of $1,000
PC Financial’s “pavilions” are located in all Real Canadian Superstores. Their Interest Plus Savings Account is very comparable to ING’s. The only major difference here is that you need to have a minimum account balance of $1,000 to get the highest rate, which isn’t very much. Another cool feature is that you get additional interest for every year you have the account. For example, if you have the account for 3 years, you get an additional 0.06%. This savings account also works on a tiered system meaning that you get more interest if you have higher balances.
The Big 5 Canadian banks also offer savings accounts with varying features and rates, so be sure to shop around and choose something that best suits your needs. If you’re wary about diving into the stock market and would just like a secure investment that will protect your money while paying you some interest, then a savings account could be for you.
