So, you finally have more than two nickels to rub together, now what the heck should you do with it? There are a lot of options out there, and financial institutions like Encompass Credit Union, will pay you to put your money in their institution. What? They just pay you? Yep.
Simple savings accounts don’t pay you very much, but you have the ability to move money in and out of your savings account at any time. You can also set up automatic transfers to add to your savings account for things that you want to save for, like a down payment for a home or a wedding, or even just a rainy day fund. You can open your own Encompass Credit Union spending or savings account completely online using our our online account opening system.
At this point, you can decide whether you want to do something beyond a savings account, like a Term Deposit, a Retirement Savings Plan (RSP), a Tax Free Savings Account (TFSA), or even a mutual fund. There are a lot of options. Over the next few weeks, we’ll look at Term Deposits, RSPs, TFSAs and Financial Planning/Investing.
A Term Deposit is a safe investment where you can decide on a locked-in investment during a specific time period or term, and in that term, there’s an established rate offered by the financial institution. The minimum deposit for a Term Deposit is $1,000. For example, at Encompass, you can choose one of three different types of Term Deposits: a redeemable, a non-redeemable or an escalator. Check out our terms and rates at encompasscu.ca.
- Redeemable – means that you can choose to invest your funds into something that gives you more interest than a savings account, for example. But you can take money out of your investment because it’s not “locked in”. Due to that, the interest rate is less than one that is locked in for a term of no less than one year.
- Non-Redeemable – means that you invest your funds into a “locked in” product for a period of between 1 and 5 years – your choice. You decide how long you want to lock in those funds, and there’s a specific interest rate attached to each year that you’ll have to decide on. It definitely gives you more return on your investment than a redeemable product or an escalator, but these funds will not be available to you until the end of that term.
- Escalator – this one is different than the other two. The rate changes each year, going up the longer you leave it in, from 1 to 5 years. The big difference is that you can access the funds, but only on the anniversary date of the investment. Overall, it’s less return than a straight up non-redeemable investment, but it would average more than if you re-invested the same amount in a redeemable investment over that same five years. It’s all about flexibility.
At the end of the term, when the funds have matured, the funds will be transferred into your spending or savings account where you can access it immediately. Near the end of the term, you’ll get a letter from us, and at that point you can decide if you want to re-invest it into the same or different investment for antoher set term and earn interest on the interest you just earned! Check out our .pdf brochures on accounts and investing!
At Encompass Credit Union, you can also rest easy knowing that your term deposit is 100% guaranteed by the Credit Union Deposit Guarantee Corporation. If you’re ready to take the plunge and open your term deposit, you can do it right now, completely online using our Encompass Credit Union online account opening system!
Check back here next week when we’ll discuss Retirement Savings Plans and how you can benefit from them.