High Interest Savings Account....

[GaryMcGowan]

We are closing on three properties at the end of the month with the same JV partner. We have thought about opening up a high interest savings account. We could put a decent amount of the reserve funds into it and receive a good return while still having access to the money.

e.g.

$1000 balance * 3.4% pa.(paid monthly) = 34.53 (per year)

Invested over 5 years = 185.02


Possible of up to $10,000 in the fund. Potential $1,850.20 earnings  
I understand that there would be tax implications but the good out performs the bad.

What are other people doing when they have significant reserve funds??? I know that some companies will put their cash into short term GICs…



Gary

 

[DianneDachyshyn]

QUOTE (GaryMcGowan @ Jul 4 2008, 10:26 AM) We are closing on three properties at the end of the month with the same JV partner. We have thought about opening up a high interest savings account. We could put a decent amount of the reserve funds into it and receive a good return while still having access to the money.

e.g.

$1000 balance * 3.4% pa.(paid monthly) = 34.53 (per year)

Invested over 5 years = 185.02


Possible of up to $10,000 in the fund. Potential $1,850.20 earnings
I understand that there would be tax implications but the good out performs the bad.

What are other people doing when they have significant reserve funds??? I know that some companies will put their cash into short term GICs…



Gary

That`s a good question, Gary. We are relatively new at this and have the same question. Since we are paying interest on our HELOC money, which we have been using for down payments, it seems to make sense to put the extra cash back into the HELOC; however, the bookkeeping part of it becomes complicated. Any insights from others would be appreciated.

Dianne

 

[TommyK]

It depends on the type of account you have. Most banks charge you a fee if you don`t have certain balance in the account. So keeping the reserve fund in the account might offset the monthly fee of, say $4-6/month? No hassle. No worry instant savings.

On the other hand, if you have no-fee accounts like PC Financials/Manulife One, then you can set up a separate high-interest account in the same bank for much higher interest (well, 3% is still better than having no interest), and easy transfer when you need it. PC Financial has free chequing and high-interest account.

Hope this helps!

Tommy

 

[TommyK]

Another note, if you are using a big-five bank account (they usually charge you a monthly fee), and if you have more than sufficient balance to waive monthly acount fees, then you can set up accounts like HSBC High-Interest Savings account or ING Direct savings account. Those accounts are set up to link your primary account to the high-interest savings account. They are strickly on-line banking so you can only do transfer between your accounts.

Great way to earn a bit of interest without moving your accounts to a different bank.