Personal Finance

What to do with 25k saved?

  • Last Updated:
  • Feb 7th, 2020 2:56 am
Tags:
[OP]
Newbie
Nov 11, 2015
75 posts
Toronto, ON

What to do with 25k saved?

I hesitated posting this question as I’m sure many of you will consider it very simple but I’m very new to money management and am pretty confused.

Last year after paying off OSAP, my brother helped me open up a TD Waterhouse investment that had a RRSP, tfsa, chequinG and savings. I put 10k in an RRSP and 5k in a chequing (was told it would waive the annual fee).

I should have done research then but I didn’t, just let my $ sit there. Well this year I have saved about 25k. Not sure what to do with it since I am wanting to buy in two years. So should I put the 25k into my RRSP? I would get $ back and I could always take it out as a first time home buyer? Should I then invest it using the couch potato method recommended here. I don’t want to lose ANY $ though since I will need it soon. Does it make sense to just have it sitting in an RRSP?

Other option is to put it into a TFSA, CIBC has a 2.75% interest right now till March 2020. I haven’t contributed anything to a TFSA yet and this would give me the option to pull out and not pay back. But I wouldn’t get as much back as I would with RRSP. I can also invest in a TFSA portfolio.

So basically my question is RRSP or TFSA? And should I just let the $ sit in both these account or invest it. Thanks :)
Thread Summary
-opened TD Waterhouse account put 10k in RRSP and 5k in chequing
-saved 25k this year
-put in RRSP or TFSA
-invest or don’t invest using couch potato method?
-how does GIC fit into this? Can I purchase it within my TFSA :/
18 replies
[OP]
Newbie
Nov 11, 2015
75 posts
Toronto, ON
Not sure how to edit my post but the other option a TD advisor gave me was a GIC and then I get a guaranteed rate? And I can do that within a TFSA or no?
Deal Fanatic
User avatar
Jan 31, 2006
8029 posts
2356 upvotes
Toronto
You put $ in CiBC TFSA until march 30, after that if you transfer it elsewhere you will charge a transfer fee, if you withdraw it you can not put back until jan 1, 2021. That why I still undecided where to put my TFSA this year since the promo period is very short.
Deal Fanatic
User avatar
Jan 31, 2006
8029 posts
2356 upvotes
Toronto
robyn1990 wrote: Not sure how to edit my post but the other option a TD advisor gave me was a GIC and then I get a guaranteed rate? And I can do that within a TFSA or no?
Yes, you can do GIC TFSA.
Deal Addict
Dec 22, 2008
2162 posts
964 upvotes
Victoria
You’re doing great! Yeah, if you’re buying in a couple years, I’d look at GIC’s for the TFSA or a TFSA savings account with Motusbank where you just leave it till you buy.

After the house purchase, work towards maxing out your TFSA with ETF’s recommended on the Canadian Couch Potato website
Newbie
May 10, 2012
16 posts
21 upvotes
London, Ontario
Keep in mind first time home buyer is now $35K
Depending on your income, try to benefit from the FTHBP as much as possible. It's almost a free loan with tax-return and make sure you keep the tax return and save it for the down-payment and not use it for anything else.
And you basically need to repay your RRSP in 15 years, 2 years after you purchased your house (so almost 17 years to slowly pay back your self)

For short term investments (< 5 years) definitely go very low risk investments.
Also look into wealthbar and wealthsimple they have really good savings rates and you can have TFSA with them too.

Just keep in mind, don't put all your eggs in one basket ;)
Deal Fanatic
User avatar
Jun 11, 2001
9473 posts
1606 upvotes
Nice job and budgeting. I assume you are pretty young... you should take MORE risk imho... but again it's all on what you can deal with, and if you need the money in the near future.

My advice is, you're young... put 100% of it in your TSFA (leave your RRSP room for higher earning yrs) into something like VGRO.
...zzz...zzz...zzz...

www.heatware.com
[OP]
Newbie
Nov 11, 2015
75 posts
Toronto, ON
cgtlky wrote: You put $ in CiBC TFSA until march 30, after that if you transfer it elsewhere you will charge a transfer fee, if you withdraw it you can not put back until jan 1, 2021. That why I still undecided where to put my TFSA this year since the promo period is very short.
Why would you want to transfer it though? And the 2.75% interest does that accure each month or on a lump sum payment. Let me know where you decide to put it I'm still not sure.
[OP]
Newbie
Nov 11, 2015
75 posts
Toronto, ON
MaxPower19 wrote: You’re doing great! Yeah, if you’re buying in a couple years, I’d look at GIC’s for the TFSA or a TFSA savings account with Motusbank where you just leave it till you buy.

After the house purchase, work towards maxing out your TFSA with ETF’s recommended on the Canadian Couch Potato website
Never heard of that bank. For some reason I am hesistant to put $ in online banks lol. So you can get a GIC in a TFSA. You think thats better then RRSP, I just like that with RRSP if I put in 25k I should be getting 7500 back.
hamidd wrote: Keep in mind first time home buyer is now $35K
Depending on your income, try to benefit from the FTHBP as much as possible. It's almost a free loan with tax-return and make sure you keep the tax return and save it for the down-payment and not use it for anything else.
And you basically need to repay your RRSP in 15 years, 2 years after you purchased your house (so almost 17 years to slowly pay back your self)

For short term investments (< 5 years) definitely go very low risk investments.
Also look into wealthbar and wealthsimple they have really good savings rates and you can have TFSA with them too.

Just keep in mind, don't put all your eggs in one basket ;)
Sorry, is your advice then to put into an RRSP vs a TFSA? Or a bit of both. CIBC is offering 2.75% interest till March 1 2020 deposit. That seems pretty good but somebody above said I wont be able to transfer it although I'm not sure why I would want to.
[OP]
Newbie
Nov 11, 2015
75 posts
Toronto, ON
sleepyguy wrote: Nice job and budgeting. I assume you are pretty young... you should take MORE risk imho... but again it's all on what you can deal with, and if you need the money in the near future.

My advice is, you're young... put 100% of it in your TSFA (leave your RRSP room for higher earning yrs) into something like VGRO.
I'm not young I'm turning 30. I did a two degrees so it took me longer to pay back OSAP. If I put it in my TFSA does it make sense to put it in VGRO when its not a guaranteed rate and I'll be taking it out in 2 years? Vs a GIC or high interest savings account. Sorry for all the questions :/
Sr. Member
Dec 3, 2002
504 posts
38 upvotes
BC
One thing to keep in mind is that those promotional GIC / bank account interest rates are listed as ANNUAL, and not monthly. So the 2.75% is roughly 0.229% a month (not counting compounding effects). I personally wouldn't go into the trouble of those unless it's 3 months minimum.. and 6+ preferably.
Deal Fanatic
User avatar
Jan 31, 2006
8029 posts
2356 upvotes
Toronto
robyn1990 wrote: Why would you want to transfer it though? And the 2.75% interest does that accure each month or on a lump sum payment. Let me know where you decide to put it I'm still not sure.
Last year, Tangerine give me a 3% one year TFSA GIC which will mature in Feb 12, 2020 after that it will go back to my TFSA saving acoount at 1.05%. I still hoping they will offer me another 3% this coming days so i can add my 2020 contribution to it.

HSBC offer me 2.18% for 218 days GIC TFSA but still undecided.
[OP]
Newbie
Nov 11, 2015
75 posts
Toronto, ON
Starcraftjunkie wrote: One thing to keep in mind is that those promotional GIC / bank account interest rates are listed as ANNUAL, and not monthly. So the 2.75% is roughly 0.229% a month (not counting compounding effects). I personally wouldn't go into the trouble of those unless it's 3 months minimum.. and 6+ preferably.
What do you mean by 3 month minimum?? If I put in my 25k I don't automatically get back a 2.75% return? Then why wpuldnt I put it in an RRSP where I'm guaranteed money back.
Sr. Member
Dec 3, 2002
504 posts
38 upvotes
BC
I mean that the promotional interest rates only typically run for a couple of months, then it goes back down to the standard rates.

Looking at the CIBC offer you mentioned:
"† This is a combined bonus and regular annual interest rate paid on new deposits made to a CIBC TFSA Tax Advantage Savings Account® and/or a CIBC RRSP Daily Interest Savings Account. The bonus and/or regular rates may change at any time without prior notice. The regular interest rate is earned on the full daily closing balance and paid monthly. For eligible accounts opened before the offer period, the bonus rate is earned only on the portion of the account’s daily closing balance that exceeds the closing balance on January 1, 2020. For eligible accounts opened during the offer period, the bonus rate is earned on the full daily closing balance. New deposits may not exceed the maximum allowable by law. Bonus interest rate offer expires March 31, 2020. Bonus interest is calculated daily and paid monthly. Other conditions apply."

The 2.75% applies until March 31... so you're looking at less than two months only.
So the paper napkin interest calc for 2 months is: $25k * (0.0275 / 12) * 2 months = $144.58 (a tad more for compounding one month).

On a side note, do confirm you have $25k of contribution room on your RRSP.
Newbie
May 10, 2012
16 posts
21 upvotes
London, Ontario
robyn1990 wrote: Sorry, is your advice then to put into an RRSP vs a TFSA? Or a bit of both. CIBC is offering 2.75% interest till March 1 2020 deposit. That seems pretty good but somebody above said I wont be able to transfer it although I'm not sure why I would want to.
RRSP is generally good if you are trying to save on taxes when your income is in the higher tax brackets. This way you will get a really good tax break, and on top of that you can use both your savings and the tax refund for your house down payment. In the long run with this strategy you will save thousands of dollars in interest on your mortgage.

The 2.75% is annualized, therefore you are getting 2.75/12 = 0.229% return on your money for the 1 month. Since we are still in February you could utilize the room you have in your RRSP to claim that in your 2019 tax return.
Again, it really depends on how much income you had last year too.
Newbie
May 10, 2012
16 posts
21 upvotes
London, Ontario
cgtlky wrote: Last year, Tangerine give me a 3% one year TFSA GIC which will mature in Feb 12, 2020 after that it will go back to my TFSA saving acoount at 1.05%. I still hoping they will offer me another 3% this coming days so i can add my 2020 contribution to it.

HSBC offer me 2.18% for 218 days GIC TFSA but still undecided.
Why not invest in higher risk profiles, if you are in it for a long term? (> 10 years)
Deal Addict
Jul 8, 2013
3017 posts
4983 upvotes
Somewhere in AB
robyn1990 wrote: I hesitated posting this question as I’m sure many of you will consider it very simple but I’m very new to money management and am pretty confused.

Last year after paying off OSAP, my brother helped me open up a TD Waterhouse investment that had a RRSP, tfsa, chequinG and savings. I put 10k in an RRSP and 5k in a chequing (was told it would waive the annual fee).

I should have done research then but I didn’t, just let my $ sit there. Well this year I have saved about 25k. Not sure what to do with it since I am wanting to buy in two years. So should I put the 25k into my RRSP? I would get $ back and I could always take it out as a first time home buyer? Should I then invest it using the couch potato method recommended here. I don’t want to lose ANY $ though since I will need it soon. Does it make sense to just have it sitting in an RRSP?

Other option is to put it into a TFSA, CIBC has a 2.75% interest right now till March 2020. I haven’t contributed anything to a TFSA yet and this would give me the option to pull out and not pay back. But I wouldn’t get as much back as I would with RRSP. I can also invest in a TFSA portfolio.

So basically my question is RRSP or TFSA? And should I just let the $ sit in both these account or invest it. Thanks :)
What is your time horizon? When do you want this $25K?

If you have a 10+ year time-frame, place all of this in VEQT ETF. That is it. I recommend using TFSA and max those out first.
Be Balanced. Be Diversified. Stay Invested.
Deal Fanatic
User avatar
Jan 31, 2006
8029 posts
2356 upvotes
Toronto
hamidd wrote: Why not invest in higher risk profiles, if you are in it for a long term? (> 10 years)
60% of my TFSA is invested there, the remaining 40% in low risk or GIC.
Deal Addict
User avatar
Dec 4, 2007
4308 posts
1960 upvotes
Quebec
If you plan to use that money in 2 years and absolutely don't want to "loose" any of it, there is not much choice.

You can chose between gic tfsa (if you have room) if not, then b2b / lbc hisa that give 3.3% until they change the rate.

I have no idea what the 2 years gic rate right now.

Top