How should Katie invest $30,000 she will need in six months?

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeFP AnswersPersonal FinanceHow should Katie invest $30,000 she will need in six months?FP Answers: This is not a question of investing for growth, but a question of preserving capital while earning a modest return in the short termLast updated 42 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.Good planning is less about chasing the highest return and more about making sure the money is in the right place, for the right purpose, at the right time. Photo by Getty Images/iStockphotoWe independently select everything we recommend. Buying through us may earn us a commission, which supports our work.Q. We will most likely need to purchase a van in a few months and it will cost us about $30,000. What would be the best way to put that money aside to make some interest before we need to make the purchase? Secondly, we were wondering if it would make sense to get an adviser to help us make a plan for how to invest what is in our tax-free savings account (TFSA), registered retirement savings plan (RRSP) and other accounts? If so, what type of adviser do we look for? —Thanks so much for any advice, KatieTHIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountFP Answers: Katie, your two questions are connected by the same core issue: how to make your money work smarter toward your goals.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againYou plan to buy a vehicle in the near future, likely for about $30,000, and you want to know where that money should sit in the meantime. Before that, though, it’s worth asking a more basic question: Is the full amount already saved?If not, six months is a workable timeline, but only with discipline. At $30,000 over, let’s say, 26 weeks, you would need to set aside about $1,155 a week, or close to $5,000 a month. For many households, that is a big ask. If that figure feels too ambitious to hold in one place, consider a two-part strategy: automate a fixed transfer each payday into a separate high-interest savings account, and use any tax refund, bonus or vehicle sale proceeds to close the gap.The point is to treat the car fund as a non-negotiable budget item, not money that will somehow be left over at month-end. In practice, “left over” is usually less than expected.Because your timeline is short, this is not a question of investing for growth. It is a question of preserving capital while earning a modest return in the short term. In other words, safety and access matter more than chasing yield. The stock market is not appropriate here.There are three sensible options.The first is a high-interest savings account, or HISA. These accounts offer easy access to your money, no lock-in and no penalty for withdrawal. The challenge is that rates vary widely. Big bank branches are often less competitive than online institutions, so it is worth shopping around. Depending on the offer, HISA rates across Canada can range from about 1.50 per cent to 4.75 per cent. That difference is worth a few minutes of comparison.The second option is a short-term guaranteed investment certificate, or GIC. A six-month non-redeemable GIC usually pays a little more than a HISA, but your money is locked in for the term. If you know exactly when you will buy the vehicle, this can work well. If there is any uncertainty, the flexibility of a HISA may be more useful than the extra interest. The goal here is not maximum return, but instead to protect the money until you need it.The third option is a HISA held inside a TFSA if you still have contribution room. This is often the most tax-efficient route because interest earned inside a TFSA is not taxed. On $30,000 earning 3.5 per cent over six months, the interest would be roughly $525. Inside a TFSA, that growth stays yours. Outside one, some of it may be taxed depending on your marginal rate. It is a simple advantage, but an important one.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Leaving the money in a regular chequing account for six months would likely mean missing out on some interest for no good reason. The better approach is to keep it safe, accessible and earning something. Give your money a job and the right tools to do the job.Your second question is also a common one. Does it make sense to hire a financial professional to help manage TFSA and RRSP accounts, especially as retirement approaches? For many Canadians with meaningful registered savings, the answer is yes. But the type of professional matters. And the complexity of your current and future situations is a factor also.The most straightforward option is an advice-only or fee-only planner. This person charges an hourly rate or flat fee to prepare a written financial plan. These professionals do not sell products and do not earn commissions on investments. For retirement planning, this can be especially valuable because the work may include RRSP and registered retirement income fund (RRIF) drawdown strategy, TFSA planning, Canada Pension Plan (CPP) and Old Age Security (OAS) timing, and tax-efficient income planning. A written plan can cost several thousand dollars, but for many households, the long-term value outweighs the upfront fee.A second model is an adviser who also manages investments and charges a percentage of assets under management. For people who want both planning and ongoing portfolio management in one place, this can be a reasonable arrangement. The key is to understand exactly how that person is paid and what services are included.A third option is where the adviser is paid mainly by commission on the products they sell. This could create a potential conflict of interest. The compensation structure matters.Before hiring anyone, ask them three direct questions: How are you paid? Are you required to act in my best interest? Will you provide a written financial plan?That last point is especially important. A conversation is useful, but a written plan is something you can review, revisit and hold against real outcomes.For Canadians nearing retirement, the stakes are high, including the interaction between RRIF withdrawals, CPP, OAS and the OAS clawback threshold. This clawback (officially called the pension recovery tax) begins when your total net income exceeds $95,323 for the 2026 tax year. For every dollar your net income exceeds that amount, your OAS pension is reduced by 15 per cent. It can create tax consequences that are easy to miss and costly to fix later. The right guidance can help prevent that.In both of your questions, the same principle applies. Good planning is less about chasing the highest return and more about making sure the money is in the right place, for the right purpose, at the right time.Janet Gray is an advice-only certified financial planner with Money Coaches Canada in Ottawa.Do you have a question for FP Answers? 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