Q: I maxed out my TFSA and RRSP. I am in my mid-20s, and have a few tens of thousands remaining in my savings account. Where is the best place to invest, knowing I may need the money for a wedding and perhaps a first home in at least two years? I know bonds and GICs don’t pay well. What type of products would be the best, knowing that even if they’re riskier, I can always take some from my TFSA and RRSP?
A: Think very hard about risk and reward when it comes to money that you may need in such a short period of time. If you make a 2% return on your $30,000, you’ll bring in about $1,200 in two years. If you make a 5% return, that amount climbs to $3,000, a difference of only $1,800. That seems like a paltry reward to put so much money at risk. GICs don’t pay much—that’s true—but you’ll get a better rate the longer you commit for. Don’t blow it by chasing returns on money you’ll need in the short term.
Bruce Sellery is a speaker and author of The Moolala Guide to Rockin’ Your RRSP. Do you have your own personal finance question? Write to us at firstname.lastname@example.org