Class Notes: Emergency Fund Investment Options & Saving Interest Rates in Canada

The Problem: Low Savings Interest Rates

• Canadian savings accounts offer very low interest rates (~0.01%)
• Other countries have higher rates (e.g., 4%)
• Low returns make it hard to preserve the value of savings

Key Needs for Emergency Funds

• Accessibility: Funds should be easy to access in emergencies
• Safety: Principal should be protected from market fluctuations
• Returns: Preferably better returns than a standard savings account

What NOT to Use

• ETFs: Not recommended for emergency funds due to market volatility and lack of immediate accessibility

Purpose of an Emergency Fund

• Acts as a financial safety net
• Should cover 4–6 months of living expenses
• Helps avoid debt from sources like credit cards or borrowing from others
• Covers unexpected events (job loss, car repairs, home repairs, etc.)

---

Top 5 Emergency Fund Investment Options

1. High Interest Savings Account (HISA)

• Description: Similar to a standard savings account but offers a slightly higher interest rate
• Current Rate Example: 0.85% (subject to change; promotional rates may apply only for a few months)
• Access: Directly accessible through your main bank; no need for external accounts
• Safety: Protected by CDIC insurance (up to 100,000 CAD per category)
• Pros:
  • Easy access to funds
  • CDIC protection for security
  • No need for new accounts if your bank offers HISAs
• Cons:
  • Still quite low interest rates long-term (often reverts to 0.01% after promotions)

---

Additional Video Promises

• Discussion of 5 different emergency fund options (only HISA detailed above)
• Comparison of pros and cons for each option
• Personal insight: where the host keeps their emergency fund and whether it’s in a TFSA
• Encouragement for viewer engagement (thumbs up for more videos)

---

Summary Points

• Most Canadian banks offer extremely low interest on savings—much lower than some other countries
• Emergency funds should focus on accessibility, safety, and modest returns
• High-Interest Savings Accounts are a common (but still low-return) option and are CDIC insured
• More options and detailed advice to follow in the remainder of the video