So to the OPs broader point, you’re still participating in the broader financial system/market – the financial system doesn’t “just” refer to items placed on the stock market, it includes any money stored in a financial institution, and ultimately even ‘money’ itself. The OPs position sounds a lot more like a libertarian / anarchist take, stating that all ‘money’ is essentially a bubble with imaginary value. I imagine this sort of mindset is increasingly on the minds of people, Americans in particular, as international trade starts to flounder – the value of the US dollar is, in some circles, starting to cause concern. I think there was a news piece from one of their central bankers a couple days ago, commenting that the value of the American dollar is down 10% against other currencies this year, so if your net worth hasn’t gone up by 11% you’ve taken a loss. Currency values are arguably based on difficult to quantify things – it can be viewed as bubble-like at a fairly fundamental level.
For the RRSP item, typically banks/CUs provide parent accounts and sub accounts, in my experience. So, for example, you can have an RRSP account at a CU which has just cash sitting in it, or that RRSP can have a sub-account Term deposit where the cash is locked in for 5 years and earns 2-4% per annum in interest (essentially just keeping up with inflation) – or an RRSP parent account with a trading sub account. Terms have lower return than the market, in general, but less risk. I’ve personally tended to split my savings between longer Terms in the RRSP for long term retirement needs, shorter more numerous Term Deposits in non-RRSPs that I can cash in for emergencies (taking a small hit if I break the term early), and a Market investment account I handle through my TFSA for now – not really sure if that’s a good approach, but it spreads the risk profiles around, and ensures that I have a baseline of emergency funds available.
In terms of interest rates / fees, if money is locked in for a longer period FIs generally don’t charge fees, and instead you earn a higher interest rate. The BMO Investonline example, I would guess, is a result of that money getting booked differently in terms of their ability to leverage it for lending, and/or it’s shunted over to a BMO subsidiary entity setup to specifically handle market actions, which is subject to different standards/fee structures. I’ve worked at banks/CUs that did that sort of thing for departments like their auto-leasing programs – which was fascinating, as the CU actually had policies in place not to lease cars to their regular financial members, because they were totally fleecing the auto side and knew it (which was deemed ‘ok’, so long as those people aren’t members/can’t vote in elections). There were also likely larger regulatory hurdles if they were to try and cross sell that sort of product.
But the long and short of all this, is basically just … if you’re storing a pile of money in a bank/CU, stick it in a term deposit so that it at least keeps up with inflation / earns you interest, rather than costs you in fees. As an added benefit, moving those funds into a non-demand account makes them a lot more difficult for scammers to get at – because the money isn’t available “on demand”.
Though again, if I’ve interpreted the Ops sentiment correctly, none of this matters from their POV, as it’s all just a house of cards.
I mean, in the case of changing values of currency, physical money isn’t changing anything there. As a Canadian forced to buy many things in USD I am constantly suffering from exchange rate changes which is similar. Money retains the same value in country though unless something goes really wrong at the bank of Canada. This is riskier because of trade and how interdependent nations are today.
So to the OPs broader point, you’re still participating in the broader financial system/market – the financial system doesn’t “just” refer to items placed on the stock market, it includes any money stored in a financial institution, and ultimately even ‘money’ itself. The OPs position sounds a lot more like a libertarian / anarchist take, stating that all ‘money’ is essentially a bubble with imaginary value. I imagine this sort of mindset is increasingly on the minds of people, Americans in particular, as international trade starts to flounder – the value of the US dollar is, in some circles, starting to cause concern. I think there was a news piece from one of their central bankers a couple days ago, commenting that the value of the American dollar is down 10% against other currencies this year, so if your net worth hasn’t gone up by 11% you’ve taken a loss. Currency values are arguably based on difficult to quantify things – it can be viewed as bubble-like at a fairly fundamental level.
For the RRSP item, typically banks/CUs provide parent accounts and sub accounts, in my experience. So, for example, you can have an RRSP account at a CU which has just cash sitting in it, or that RRSP can have a sub-account Term deposit where the cash is locked in for 5 years and earns 2-4% per annum in interest (essentially just keeping up with inflation) – or an RRSP parent account with a trading sub account. Terms have lower return than the market, in general, but less risk. I’ve personally tended to split my savings between longer Terms in the RRSP for long term retirement needs, shorter more numerous Term Deposits in non-RRSPs that I can cash in for emergencies (taking a small hit if I break the term early), and a Market investment account I handle through my TFSA for now – not really sure if that’s a good approach, but it spreads the risk profiles around, and ensures that I have a baseline of emergency funds available.
In terms of interest rates / fees, if money is locked in for a longer period FIs generally don’t charge fees, and instead you earn a higher interest rate. The BMO Investonline example, I would guess, is a result of that money getting booked differently in terms of their ability to leverage it for lending, and/or it’s shunted over to a BMO subsidiary entity setup to specifically handle market actions, which is subject to different standards/fee structures. I’ve worked at banks/CUs that did that sort of thing for departments like their auto-leasing programs – which was fascinating, as the CU actually had policies in place not to lease cars to their regular financial members, because they were totally fleecing the auto side and knew it (which was deemed ‘ok’, so long as those people aren’t members/can’t vote in elections). There were also likely larger regulatory hurdles if they were to try and cross sell that sort of product.
But the long and short of all this, is basically just … if you’re storing a pile of money in a bank/CU, stick it in a term deposit so that it at least keeps up with inflation / earns you interest, rather than costs you in fees. As an added benefit, moving those funds into a non-demand account makes them a lot more difficult for scammers to get at – because the money isn’t available “on demand”.
Though again, if I’ve interpreted the Ops sentiment correctly, none of this matters from their POV, as it’s all just a house of cards.
I mean, in the case of changing values of currency, physical money isn’t changing anything there. As a Canadian forced to buy many things in USD I am constantly suffering from exchange rate changes which is similar. Money retains the same value in country though unless something goes really wrong at the bank of Canada. This is riskier because of trade and how interdependent nations are today.