Finance Security of principal The last thing anybody wants to worry about is whether the bank, credit union or other institution that’s holding their cash is in financial trouble. Most of the time, this isn’t really an issue – most analysts believe that Canadian banks are among the safest in the world. But there’s nothing to say that it can’t happen. The good news is, many cash investments are protected by deposit insurance – chequing accounts and GICs are examples. But not every cash investment offers such protection. And, in many cases, there are limits: deposit insurance only protects up to a certain maximum, for example, or only if funds are kept in Canadian dollars. If the thought of your institution going under makes you feel sick to your stomach, stick to those vehicles that offer the greatest degree of protection, and those institutions that are on a solid financial footing. If you’re not all that concerned about it, you’ve got more options available to you. Costs and fees Most of the time, cash investments don’t cost you much in the way of fees. Sure, your bank may charge you a couple of bucks every month for your chequing privileges, but normally there aren’t a lot of buying/selling commissions, management fees or other transaction costs associated with most cash investments. One cost to consider, however, is the cost of gaining access to your cash. Whether it’s something on your “bucket list” that you’ve always wanted to do, a great deal which you just can’t pass up or an unexpected expense that punches a hole in your monthly budget, there may be times when you’ll need to get at your cash sooner than you planned. Some cash investments allow you to access your money whenever you want. With others, you’ll have to pay for that privilege. Before you choose a particular vehicle, ask yourself what penalties or other costs will you incur if your plans change? Can you get instant access to your cash in an emergency? Do you feel less “secure” or less “in control” of your finances if the answer is no? CSANews | SUMMER 2017 | 29
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