I received an email from Michelle the other day about the best way to grow her down payment savings for a house in 2 years time. Here is the email:
My husband and I will buy a house in about 2 years. We have no credit card debt or loans and usually we can put away between $500-$800 per month. We are trying to save as much as possible for a down payment. We have RRSP's but you can only use $20,000 towards a house. We will do that at the time. In the mean time we have an account that gives us about 3% interest on the money we are saving monthly. Currently there is $42000.00 there. How can we make this money grow faster in the next 2 years without locking it in? Thanks for any suggestions.
To begin, I would like to say congrats for staying out of debt and putting away money every month. That in itself, is a huge financial achievement.
So, the key question is, how to grow the down payment money as fast as possible without locking it in? With the 2 year time line that you have, I think that investing in the stock market is out of the question. I think that your best bet would be maximize your RRSP (for both of you), and put the rest in a PC Financial Savings account that pays 4% annual interest.
Also note that with the RRSP Home Buyers Plan, you can contribute $20,000 from EACH of your accounts. So you can potentially use $40,000 from your RRSP's providing both of you qualify. As for which investment vehicles to use inside the RRSP, if you're not willing to lock in your money, then a money market fund is among the few choices available.
Note that I'm not a financial advisor, so please take my advice at your own risk. Note my disclaimer at the bottom of the page.