If you were keeping an eye on what’s happening in the world of finance, you knew that 2 per cent returns on savings accounts couldn’t last. But it’s still disappointing to see EQ Bank announce that the return on its Savings Plus Account falls to 1.7 per cent from 2 per cent effective Thursday, Aug. 6.
As of mid-week, Bridgewater Bank was still offering 2.1 per cent on its Smart eSavings Account. After that, we have a cluster of banks offering 1.5 to 1.8 per cent. Prepare for lower rates ahead.
Let’s use one-year federal government Treasury Bills as a benchmark for returns on safely parked money. The yield from these T-bills was about 0.23 per cent in early August and has been edging lower since late July. Stock market investors are in a great mood these days, but the people buying and selling T-bills and bonds have a pessimistic view that is being played out through falling yields.
Pay attention to the pessimists, even if the economic lockdown caused by the pandemic has eased and both the stock market and housing market are doing well. It’s still foundational personal finance to have a larger than usual amount of money in savings account.
I have accounts at various high interest banks and have been favouring EQ because the 2 per cent rate was offered to all, with no temporary special deals for special clients. For now, I won’t be moving any money out as a result of the rate cut to 1.7 per cent. EQ hung in a long time at 2 per cent and I expect it to be among the last to participate in the next round of rate reductions.
Anyone have thoughts on Bridgewater, which is a member of Canada Deposit Insurance Corp. and owned by the Alberta Motor Association? One key question: Will that 2.1 per cent rate last long enough to get an account set up and money transferred in?
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Rob’s personal finance reading list
When to get serious about switching car insurance companies
A study by LowestRates.ca suggests you get the most value from shopping around for car insurance when you enter your 40s. “Rates start falling precipitously for customers in their 40s and upwards.”
These old school personal finance rules are looking stale
Updating rules you’ve heard for ages about how much you should spend on rent, how much you should save and more.
The pros and cons of Wealthsimple Trade
The free stock-trading app gets a middling review from the HowToSaveMoney website. A number of online brokerages are mentioned as alternatives to Wealthsimple Trade – one cheap broker that didn’t get a mention is Virtual Brokers, which I have ranked as an upper tier broker. More on Wealthsimple Trade in this column I wrote on the pandemic trend of young people trading stocks using free apps for their phones.
What happens to your pets if you die suddenly?
This is one of seven points on a list of things you may have missed in putting your will and estate plan together. Also on the list: An advanced direction telling your family your thoughts on life-extending care.
Ask Rob
Q: Our condo corporation’s property insurance is increasing again this year by 21 per cent. That’s two years of about 20 per cent, and the year prior it went up by about 15 per cent. Our broker says there is one major provider – Intact – and therefore not much he can do. What suggestions do you have for us and likely many others? And no claims in the past five-plus years!
A: I’m on a condo board myself and we have faced a somewhat similar situation. It appears that condos are being hammered by property insurers in much the same way that home owners are. The background is more claims as a result of extreme weather patterns. I think the best solution here may be to ask individuals and condo board members for the names of insurers that are both good and bad on premium hikes over the past five year. Tell me your condo insurance story at rcarrick@globeandmail.com.
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
A 12-part financial toolkit for people who want to learn more about personal finance and investing. Designed by the federal Financial Consumers Agency of Canada, it’s fact-based and not a sales tool.
Video of the week
Globe and Mail personal finance editor Roma Luciw and I discuss the cost of parenting and how it doesn’t dramatically decline after your kids are out of daycare.
In case you missed these Globe and Mail personal finance-related stories
- Shopping for a mortgage? Variable rates are a gamble that you don’t need to take
- Five ways to help pay for postsecondary school during COVID-19
- John Heinzl’s model dividend growth portfolio as of July 31, 2020 (for Globe Unlimited subscribers)
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Rob Carrick