Where to park cash

For the best yields in high-interest savings accounts, it pays to shop around.

Gail Bebee 16 December, 2014 | 6:00PM
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Cash is a wonderful thing. It can rescue family finances in an emergency, act as the ballast of a retirement savings portfolio or be ready to make the down payment on a new house or next year's contribution to a tax-fee savings account. Regrettably, this safest of asset classes will never make you rich if it is parked in a regular savings account at one of the major Canadian banks. The going interest rate on such accounts is currently 0.25% or less. After inflation and taxes, it's a losing proposition.

At one time, money-market funds -- mutual funds that invest in high-quality, short-term government or corporate debt -- offered reasonable returns and were a popular low-risk destination for cash. However, this is no longer the case. Almost all money-market funds have returned less than 1% annualized over the past five years and improved performance will depend on higher interest rates.

Though returns are still low, there are better places to park cash than a regular savings account or a money-market fund. If you plan to spend the cash in the near future, moving it to a different savings account at the same bank you do business with could be an easy way to increase returns.

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About Author

Gail Bebee

Gail Bebee  Gail Bebee is an independent personal finance speaker, teacher and the author of No Hype--The Straight Goods on Investing Your Money. She can be reached at gbebee@gailbebee.com; her website is www.gailbebee.com.

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