Saving for short-term goals
If you have a smaller amount to invest
Consider these 4 common optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition:
- Chequing account
- Savings account
- High-interest savings account
- Guaranteed Investment Certificate (GIC)
To learn more, read Comparing short-term investments.
If you have a larger amount to invest
Consider these 5 options:
- Treasury bills (T-bills)
- Money market funds
- Commercial paperCommercial paper A kind of unsecured loan you make to a corporation. You buy the investment at a discount and you get the full value back on the maturity date. The time period is usually nine months or less.+ read full definition
- Government bonds
- Corporate bonds
Deciding where to invest
Compare different products and decide which one gives you the features you need. Think about when you will need your money, for example, and what fees you will have to pay.
Also compare the interest rateInterest rate A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.+ read full definition each investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition pays. For example, cash and cash-equivalents give you low risk and easy access to your money, but they also have a lower return than other short-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition investments. And they may not keep pace with inflationInflation A rise in the cost of goods and services over a set period of time. This means a dollar can buy fewer goods over time. In most cases, inflation is measured by the Consumer Price Index.+ read full definition.
When you’re shopping around, you may want to start by talking to your financial advisor about the products they offer.
10 questions to ask
- What interest rate will you get?
- Do you qualify for any special rates? Can you get a higher interest rate if you investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition more money? If you have other products with this financial institution?
- Is there another safe option that pays a bit more?
- Are there service fees and how much are they?
- Are there any other costs?
- Can you get your money when you want it — quickly, easily and without penalty?
- Is there any risk you could lose any of your money?
- Could the interest rate change?
- Do you have to make a minimum depositMinimum deposit The lowest number of dollars you have to put in a bank account or other investment.+ read full definition?
- Is your money insured by the government?
3 reasons to hold cash equivalents
To pay for unexpected bills and expenses
- To have a small, steady and safe income stream if you need it
- To invest in the stock marketStock market The collection of markets and exchanges where stocks, bonds and other securities are issued or traded.+ read full definition if there is a change in the stockStock An investment that gives you part ownership or shares in a company. Often provides voting rights in some business decisions.+ read full definition market that creates new opportunities
- To help hold up the value of your portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition if some of your other investments lose value
If you get a bonus at work
Instead of spending a bonus, consider using it to top up your savings.
A cash equivalentCash equivalent An investment that is like cash because it’s typically easy to get your money back. It is safe and short-term. Examples: Bank accounts and Treasury bills.+ read full definition is an investment that can be turned into cash within 90 days, like a savings accountSavings account A bank account intended for depositing funds. Pays interest and lets you withdraw cash at any time.+ read full definition, money market fundMoney market fund A fund that invests in short-term, low-risk investments such as treasury bills, bonds and bankers acceptances. Some money market funds specialize in Canadian or US investments or invest only in treasury bills.+ read full definition or a T-bill.
Use this calculator to see how even small amounts of money saved add up over time.