Does 5% in a savings account sound like a good idea?

[Big Rig]

Seeking investment safety with crazy Trunp in power but I still want some return
so I got an idea

Some banks offer premium interest for for first timers just to get them in there

CIBC offers 5% on savings account for first 3 months and you can take it out whenever

Must be under a million dollars and one million times .05 is 50 grand

So, do that with 4 banks and you got 5% interest for a year and principal is protected
up to 100 grand by Canada

The effort is not that great, just close account and get a bank note then go to another bank
so you got a full year of investment without Trump affecting you

Sound good?

 

[JohnHenry]

You have to assume that the offer will be available with other banks three, six and nine months from now

 

[the general]

Seeking investment safety with crazy Trunp in power but I still want some return
so I got an idea

Some banks offer premium interest for for first timers just to get them in there

CIBC offers 5% on savings account for first 3 months and you can take it out whenever

Must be under a million dollars and one million times .05 is 50 grand

So, do that with 4 banks and you got 5% interest for a year and principal is protected
up to 100 grand by Canada

The effort is not that great, just close account and get a bank note then go to another bank
so you got a full year of investment without Trump affecting you

Sound good?

You can move your money around electronically now, quite simple. Need to set it up, so few days for that, and takes a couple of days to move, but otherwise not very complicated. I wouldn't physically move it around and would keep the accounts open, with a small balance. Banks will offer special rates from time to time, but doubt 5% is in the cards. Perhaps 3.5 to 4.

 

[themaxx]

Well, interest from a bank account is treated as taxable income, so your $50K gets taxed at whatever your taxrate is.
Currently most of the Big5 banks dividend yield are just under 5% (BNS is higher), and you get favourable tax treatment thanks to the tax credit.
$50K interest income would cost you a few grand in tax, whereas same amount from bank dividends might cost a few hundred (if that).
There are tables & charts available showing tax comparisons for canadian dividends versus interest. Check it out.

 

[Big Rig]

Well, interest from a bank account is treated as taxable income, so your $50K gets taxed at whatever your taxrate is.
Currently most of the Big5 banks dividend yield are just under 5% (BNS is higher), and you get favourable tax treatment thanks to the tax credit.
$50K interest income would cost you a few grand in tax, whereas same amount from bank dividends might cost a few hundred (if that).
There are tables & charts available showing tax comparisons for canadian dividends versus interest. Check it out.

But , now you are dealing with stock prices and Canadian Banks
are not immune from market downturn and dividend fluctuations

 

[themaxx]

But , now you are dealing with stock prices and Canadian Banks
are not immune from market downturn and dividend fluctuations

And??
Canadian bank deposit rates aren't immune from fluctuations?
If you're so afraid of these variables, equity markets aren't for you, maybe look at monthly tbills, or long bonds. These returns are generally considered 'risk free', but don't expect 5% today, so in that sense, yes your plan works (again, expect to be taxed on that interest, so your 5% will end up being closer to 4.25% after tax). Some folks consider Cdn bank dividends to essentially be risk-free, it all depends on your personal interpretation of that theoretical rate and hypothetical risk. Anyhoo, best of luck to you, friendo!

 

[HungSowel]

If you are ok with doing the work then it is a decent way to get more interest. Your funds are superliquid so if you spot a good deal on the stock market then you could move on it immediately.

 

[bazokajoe]

If you have room put as much as you can in a TFSA and by a stable stock like Enbridge.
Any dividends and Capital gains will be totally tax free and take the cash out anytime you want.

 

[themaxx]

If you have room put as much as you can in a TFSA and by a stable stock like Enbridge.
Any dividends and Capital gains will be totally tax free and take the cash out anytime you want.

But , now you are dealing with stock prices and Canadian pipelines
are not immune from market downturn and dividend fluctuations


Sorry, couldn't resist

 

[bazokajoe]

But , now you are dealing with stock prices and Canadian pipelines
are not immune from market downturn and dividend fluctuations


Sorry, couldn't resist

So what. There is risk in everything.
Tax implications are much better in a TFSA with a company(ENB) that pays a steady dividend that also has history of increasing.

 

[HungSowel]

ENB is a good stock, I just bought some today in my tfsa. It is a safer stock than typical stocks but I would not call it a safe stock.

Of the stocks I track, Loblaws, Fortis, and Hydro One are most safe. I bought Fortis and Hydro One stock today as a safe place to store money. the beta of those stocks are in 0.3 range.

IMHO Loblaws is the safest of safe but I just do not like grocery/retail businesses so I did not buy any. The 1 year return is 40%, YTD return is 16%.

 

[Dave in Phoenix]

You should have a diversified portfolio of equities for long-term growth and cash, such as the savings account, for short-term liquidity so you don't have to sell equities in a significant market decline and lock in your losses.

In the US, interest rates were falling but may increase significantly due to Trump's tariffs and other factors. A few years ago, I locked in a high 5.5% interest rate in a 3-year annuity. It accumulates non-taxable like your retirement acct options. The negative is that to the extent of income, it is taxable as ordinary interest income when you take it out. However, the investment itself is not taxable, as it represents after-tax income. When it matures (in Jan 2026) I can roll it over tax free into another annuity or take out some of I need to - hopefully not - so it can continue to grow tax free. I also have a relatively large amount of cash in an online account that was earning over 5% but has since dropped to about 4%. However, it is liquid without cost at any time, unlike annuities, which, if withdrawn early, incur a cost before 3 years, albeit a minor one.

All of the above is in the US. I am not familiar with how annuities are treated in Canada.