On July 13^th the Bank of Canada announced another interest rate hike of 1%, making it the largest increase since 1998. With another increase expected in September, this means the prime rate could likely reach close to 3% in the fall. Although these rising rates do impact the amount of interest you pay towards unsecured debt like personal loans or credit cards, it also means you get higher returns on most High Interest Savings Accounts or investments like GICs.

What are the best ways to save right now?

The silver lining of interest rate increases, is that the rate of returns goes up in relevant investment vehicles as well. This means any funds you have set aside in GICs or High-Interest Savings Accounts could start to grow quicker than in the recent past. With that being said although these returns have increased, their rate of return may not match the current rate of inflation. In order to protect yourself against inflation, you may want to consider saving a portion of your money in investments like market-linked GICs or mutual funds that may better protect you against inflation-related fund depletion. Whether you prefer to play it safe and take advantage of rising rates of return, or have more appetite for risk and are looking to offset the rate of inflation that often accompanies rate hikes, it’s always a good idea to review your goals and your portfolio with your advisor. They can take stock of market conditions and how it may impact your current financial goals, and put together a plan that makes you feel confident about your path forward.

How will this affect my everyday accounts and how can I prepare?  

Here are some basic tips for adjusting to the interest rate increase:

• Take some time to review the types of accounts you have, and how they fit into your overall financial plan.
• Make sure you understand how your line of credit or mortgage works.
• Be prepared to pay more than your currently monthly amount on your line of credit going forward.

In short, you will need to begin budgeting and preparing to pay more on credit cards, lines of credit, and loans.

We’re here to help.

If you’re still unclear what this could all mean for you, connect with one of our advisors. We’re on standby to help you make sense of these rate hikes and feel confident about your finances. Call us at 1.888.517.7000 or book an appointment online.

 

The stuff we have to say

Coast Capital Savings Federal Credit Union provides advice and service related to deposit, loan, and mortgage products. Coast Capital Wealth Management Ltd. provides investment and financial planning services. Coast Capital Financial Management Ltd. provides advice and service related to segregated funds, annuities, and life insurance products. Worldsource Financial Management Inc. provides advice and service relating to mutual funds. Mutual funds are not guaranteed or insured by any financial institution, government, or other deposit insurer. Mutual fund values change frequently and past performance may not be repeated. Commissions, trailing commissions, management fees, and expenses may all be related with mutual fund investments. Important information about mutual funds is contained in the relevant fund facts and simplified prospectus. Please read the fund facts carefully before investing.

The views expressed here are those of the authors and writers only and not necessarily those of Worldsource Financial Management Inc. It may also include forward-looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate..

This material is for general and educational purposes only and is based on the perspectives and opinions of the owners and writers. It is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting, financial or other professional advice. Investors should always consult an appropriate professional regarding their particular circumstances before acting on any of the information here.