When Linda checks her mail, she sees that the bank statement for her savings account has arrived. Linda has a keen interest in this account because she’s using it to save for a new car.
This month, she sees she has saved $6,800. She is pleased, but then she looks at how much interest she earned last month: just $2.83! That doesn’t seem like much.
Linda decides she can do better. She picks three other options to compare:
| Type of investment |
How much money will Linda invest? |
What return will she get? |
How much will Linda have in one year (before fees)? |
| Treasury bill (1 year) |
$6,800 |
1.3% |
$6,888 |
| Money market fund |
$6,800 |
0.2% |
$6,814 |
| Government of Canada bond that matures in 1 year |
$6,800 |
1.4% |
$6,895 |
Source: Bank of Canada
Linda’s decision:
She puts her $6,800 into a Government of Canada bond. She doesn’t feel there’s a lot of added risk and she wants to make more on her money than she can with the other choices. In a year, she may choose to do something different. She may even be ready to buy her new car.