I have quickly changed my mind (see my earlier post) and decided to go with President’s Choice Financial Tax-Free Savings Account (TFSA) instead of ETrade for short-term savings. I will keep my ETrade TFSA though and use it once I have money available for longer term savings.
I compared PC’s Tax-Free Interest Plus Savings Account with ING’s Tax Free Investment Savings Accounts and PC’s interest rate is 1.05% higher. We also have all our daily banking and high interest savings at PC now so being able to use PC for our TFSA.
My wife and I just opened up Tax Free Savings Accounts (TFSA) at E*Trade. I’m still not sure what I am going to invest in, but my requirements are that the initial capital has to be protected because we will most likely be taking the money out for a down payment in the next few years. We might just buy some shares of iShares’ Short Term Bond Index Fund (XSB). The only other possibility I had considered was to open a Tax-Free GIC with ING or a hight-interest savings account at President’s Choice, but interest rates are so low, I figure I can’t do any worse with short term bonds. The disadvantage with XSB is that I would have to pay commission every time I buy and 0.25% MER on top of that. But I think it’s worth it for the diversification it offers. Building a bond ladder yourself would involve a lot of commissions and a lot of work, so something like XSB is really the cheapest way to invest in the bond market. Real return bonds are also a possibility, and not a bad one, since they virtually guarantee that you’ll at least beat inflation.