Best investment options for short-term savings goals

For this Finance Friday, Dave Schurman of the FirstOntario Credit Union joined Annette Hamm on Morning Live to answer viewer questions about short-term savings plans and mortgage rates.

I’ve recently sold my house. After paying off the mortgage and fees, I have about $240,000 left. We are renting now but will be buying a new home at some point. I don’t want to get hit with high taxes by the Canada Revenue Agency, so what are short-term investment options that we can easily access the money when needed?

The best investment options for short-term savings include a tax-free savings account (TFSA), high-interest savings account (HISA) and guaranteed investment certificate (GIC), Schurman said.

When it comes to a TFSA, Schurman recommended choosing a low-risk portfolio to protect against the chance of any significant loss.

While the interest rate will not be ideal for a HISA or GIC, he said contributors can access the money whenever they need it.

Schurman noted that a registered retirement savings plan (RRSP), stocks, mutual funds and exchange-traded funds are not designed for short-term savings because of the high risks associated with them.

I am a single female, 63, retired with a pension and have $100,000 in RRSPs. I owe $210,000 on a home equity line of credit at 3.05 per cent. My home is valued at $700,000. I’m paying interest only so that I have enough money for travel and expenses. When I sell my home, I’ll pay the line of credit off and my two daughters can share the remaining proceeds. Is this my best course of action or should I lock in the mortgage at a fixed rate?

With a home equity line of credit, Schurman said the interest rate can fluctuate.

“The downside of this right now is that interest rates are going up,” he said.

Schurman recommended locking at a fixed rate.

If you have a question for Schurman, email him at FinanceFriday@FirstOntario.com or message him on Twitter at @Finance_Friday. If your question or topic is selected to be covered on air, you will win a gift card from a local business in your community.