Hard to believe you’re making zero on deposits at many banks and investment dealers. Here’s an example featuring TD Canada Trust, always at the bottom of the list when it comes to savings rates.
A reader told me that his 92-year-old mother bought a “money market GIC” from TD Mortgage Corp. in June 2008. It was renewed automatically a year later at an astonishing rate of interest — 0.0010%.
An ex-banker, he’s never heard of a rate this low. His comment:
One thousandth of one per cent per annum… My initial reaction was that it must be a computer error, despite the fact that returns on savings are very low right now.
In fact, the actual interest to be paid at maturity would be 19 cents… on a deposit of $18,000 for a year.
Perhaps the Guiness Book of World Records might find it worth a mention.
Money market funds are also giving zero returns, in most cases, according to a new report by FAIR Canada. And they would be giving less than zero (negative returns) if managers were not absorbing fees to avoid this outcome.
I’m on FAIR’s board and know its goal is to improve investor protection. In this case, it recommends:
— Investors should be notified when the return on a â€œsafeâ€ investment turns negative and when fees are being cut. The current requirements — one-time disclosure of fees in the simplified prospectus and semi-annual reports on total fees paid by the funds — are not prominent enough to serve investors properly.
— Advisors should consider switching clients to higher-yielding alternatives, such as premium savings accounts.
— Investors should stay current and well-informed about their accounts and alternatives and not just rely on their advisers.
In my own experience, I earned negative returns with a CIBC bonus savings account that paid 0.1% on daily closing balances up to $2,999.99 and 0.7% on $3,000+. Since each transaction cost $5, I was soon in negative territory. Today I have no savings account and make automatic transfers from my chequing account to my line of credit, which I use to handle large bills.
So, where do you keep your money for short-term gains and little risk? Please share your ideas for what to do in a low-rate climate that may persist for a while longer.