My colleague Rita Trichur wrote a smart column recently about encouraging Canadians to save more by resurrecting Canada Savings Bonds. I have to admit a soft spot for CSBs.
I bought them myself with the payroll savings plan option when I first got into the work force, and quite a few people have told me over the years that they miss being able to buy CSBs over by payroll deduction. They found it a painless way to put money away for emergencies or near-term savings goals. I recall using some CSB money for a house down payment.
My addition to Ms. Trichur’s suggestion: let’s restart CSBs as a workplace savings plan first. Encourage people to have a portion of their pay diverted to a CSB, just like in the old days before CSB sales were ended in November 2017.
Employers may offer group registered retirement savings plans or pensions to help employees put away for retirement, and there are also group tax-free savings accounts. But there’s typically an investing emphasis on these plans. More could be done at the employer level to encourage employees to save as well as invest.
CSBs used to perform that function, and they haven’t really been replaced. A key issue in bringing them back would be the interest rate offered. Part of the reason why CSBs lost popularity is that the rates they offered declined along with savings accounts. A new bond program would need to offer rates that beat the big banks – not much of a hurdle – and be competitive with alternative banks. It’s unclear whether the federal government would want to pay that much when it can issue Government of Canada bonds with very low yields.
CSBs have some brand awareness with boomers and older people, but a lot of work would have to be done to attract young people. On the plus side, administrative costs for a new CSB could be minimized by running a Gen Z-friendly virtual operation that users can access on their phone.
There are always going to be better savings options than CSBs, notably alternative banks that play it aggressive in setting rates. What CSBs offered is feel-no-pain personal finance. Sign up, have a bit deducted off your paycheque and watch the savings grow. Deducted at source are three of the most powerful words in saving.
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Rob’s personal finance reading list
Brace yourself for the cost of winter travel
“Both airfare and car rental prices are on the rise, and the added fee for one or more mandatory COVID-19 tests could make the trip cost-prohibitive,” CBC reports.
Renos that get a thumbs down from home inspectors
Five home renovations that could raise health and safety issues. I kind of like exposed brick, but it’s on this list.
If you’re in the market for a house or condo …
An argument for getting a mortgage pre-approval right now to lock in a rate.
Hope for GIC investors
Five-year rates on guaranteed investment certificates are starting to rise. They should – five-year Government of Canada bond yields have jumped lately
Ask Rob
Q: Our natural gas furnace is coming to its end of life. With anticipated future increases in natural gas due to carbon pricing, is it worthwhile switching to an electric heat pump? Home maintenance costs are a big port of our budget. We plan on being in the house for another 15 or so years.
A: And so begins what will be a long conversation about being climate-aware in your spending on home maintenance and upkeep. In Ontario, the cost of heating a home with electricity is much higher than with gas right now – maybe go with a high-efficiency gas furnace? I’d love to hear an expert on home heating add their thoughts on this question.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Sign up for The Globe and Mail’s Green Investing 101 newsletter course. For the climate-conscious investor.
The Money-Free Zone
The new album from Jason Isbell and the 400 Unit, Georgia Blue, is a collection of covers of songs from the state of Georgia. A couple of REM songs are in the mix – my fave is Driver 8 – and so is an awesome take on James Brown’s It’s a Man’s, Man’s, Man’s World, with vocals by Brittney Spencer.
Watch this
David Chilton, the man behind the Wealthy Barber personal finance franchise, on being an executor for a loved one’s will. A bit of levity here to highlight that this isn’t an easy job. More on the travails of the executor can be found in a recent newsletter.
ICYMI
What I’ve been writing about
- This year is shaping up as the worst ever for bond ETFs, but there are some bright spots
- We are heading into the most challenging period to own a home since the interest rate surge of the early 1980s
- Six things a brutally honest banker would tell you about mortgages, HELOCs and market-linked GICs
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID-19 has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
