Canadian Inflation rate double that of Term Deposit Interest

I was just checking out our Key Canadian Financial Data page and realized and was shocked to notice that the inflation rate is double what you can get on a term deposit. Inflation is at 2.52% according to the Bank of Canada.

One year term deposits are half that (from .650 to 1.40 if you have over a $1,000,000). The actual banks are a little bit hungrier for money than that and will give you 1.5% on a one year term deposit, even starting at $1000.

Zimbabwe dollars inflation rate
Zimbabwe dollars: with loose money supply
inflation outpaces interest rates (photo Peat Bakke)

Given the amount of money the American government is issuing to prop up the banking system and now to car manufacturers – the Canadian government is almost certain to follow in the US footsteps, although hopefully on a smaller scale – holding your money in cash or term deposits is a guarantee of starting next year with less money than you have now.

After what happened in the stock market, there are no easy answers but several life insurance companies in Canada offer risk free tax preferred solutions  Many Canadians are unaware that Universal life insurance contracts offer risk free accounts which grow on a tax sheltered basis and with minimum investment guarantees of 4% or higher. A great feature in today’s low interest rate environment

If you would like more information, give me a call at 905.248.4849 to discuss your own situation.

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