Canada Savings Bonds Alternatives | Up-to-date Options for Profitable Investments

August 3, 2021 | Editorial Team

Since you can no longer buy a Canada Savings Bond from the government, you may be wondering what alternatives there are available. Thankfully, a savings bond isn’t the only reliable investment you can make.

CSBs were popular because they were low risk, making them perfect for first-time investors. If you are looking for a low-risk investment in Canada, a good place to start is by getting a high-interest savings account or a Guaranteed Investment Certificate (GIC).

The CSBs Alternatives

A high-interest savings account is an extremely low risk as you cannot really lose money. Some accounts may have a minimum balance or fees to use or transfer your money. Otherwise, the money you deposit will simply earn money over time. Some high-interest savings accounts offer interest as high as 1.50%.

A guaranteed investment certificate is another great, low-risk option. It is a type of investment sold by banks and trust companies in Canada. They offer a fixed rate of return and are insured by the government. Many Canadians buy GICs as part of their retirement plans as they are a steady investment.

If you are looking to earn more money and take a bit more of a risk, investing in exchange-traded funds (ETFs) may be a better option for you. ETFs are similar to mutual funds and stocks in the way they are traded. The main difference with ETFs, however, is that they are a bundle of stocks, bonds, and commodities. As ETFs are so diverse, they provide less risk than investing in just one type of stock or bond. Here’s also a complete guide on how to buy them.

ETFs also tend to be cheaper and have more of an earning potential. So, the bit of a higher risk you take in investing in them tends to pay off.

Many Canadians invested in the Canada Savings Bonds because it was a hands-off investment. You simply had to buy a bond and wait until it reached maturity to make the most money. Once it did, all you had to do was cash it in.

Investing in things like ETFs may not seem as hands-off, but it can be. You can simply hire a robo-advisor to do all the investing for you. Just discuss your needs and wants with them, and they can set up a successful ETF portfolio for you.

If you are interested in investing in ETFs yourself, here are three of the best, most reliable ETF providers in Canada. Vanguard, Bank of Montreal, and iShares. They offer a wide range of ETFs for any investor, new or old. You can earn much more money this way compared to investing in Canada Savings Bonds.

ETFs surrounding technology, real estate, and healthcare tend to be the most popular. These industries are always needed and are always advancing. Thus, investing in ETFs in one of these sectors is a great place to start.

Canada Savings Bonds History

If you have lived in Canada for a long time, you have likely heard of Canada Savings Bonds. Since their creation in 1945, they have been popular among Canadians, especially those looking to invest for the first time ever. We’ll get more into their history later on in this article, but it is important to note that these savings bonds stopped being sold in 2017. You can still cash them in if you have them, but the government no longer sells them.

This may have left you wondering why we still decided to discuss them in this article if you can no longer buy them. The answer is, their history is still important. These bonds paved the way for many investors in the country. For many, buying one of these bonds was the first investment they ever made. Now that they are no longer available, what are these investors buying?

If you invested in this program and are now looking for an alternative, you’ve come to the right place! Let’s dive into the history of these bonds and find out what a good, alternate investment could be.

What is the Canada Savings Bond?

The Canada Savings Bonds (CSBs) were a type of investment instrument that the Government of Canada offered through the Bank of Canada. We are referring to them in the past tense because, as of 2017, the Canadian Government ended the program. Although they are no longer sold, if you still have CSBs they are still valid. They will continue to earn interest until they mature or until you redeem them.

They were similar to the American version of U.S savings bonds and were created to help manage national debt. CSBs were a form of Government of Canada debt that was sold to Canadians. The government could then use the funds from selling the bonds to fund federal expenditures.

The interest rate for savings bonds was competitive and came with a guaranteed minimum rate. There were three types of savings bonds. The first two were standard Canada Savings Bond and Canada Premium Bonds. Both were available in regular interest as well as compound interest. Premium bonds had a higher interest rate. The last type was Canada Investment Bonds were only redeemable after their 3-year maturity period.

Canada Savings Bonds Redemption

You can cash in Canada Savings Bonds at any time (unless it is an investment savings bond). The best time to cash them in, however, is when they reach maturity. This is because Canada Savings Bonds will earn interest until they reach maturity, up to ten years after you purchase them.

When your savings bonds reach maturity, the funds you earned from the interest will typically be deposited to you automatically. You can receive your money by cheque or direct deposit if you are registered. If you aren’t registered, you can do so online through the CSB Online Services. If you prefer, you can also redeem bonds that have reached maturity by calling the Payroll Savings Program customer service number.

If you are set up for a direct deposit, you can get your money within four business days. Cheques should be received within seven to ten business days.

The process is similar if you have savings bonds in a Joint Plan. The only difference is both plan owners will have to sign the cheque to deposit it. Or, the money can be deposited into a joint account.

You can also simply bring in your bonds to a bank or financial institution to have them cash it out for you. You will need a physical certificate to take it to the bank, though.

Historical Facts About Canada Savings Bond

The Canada Savings Bonds program was officially created in 1945 but has an earlier history. During the first World War in 1915, war bonds were being sold to help finance military efforts. War bonds were then renamed Victory Bonds in 1917 and were sold until 1919.

In 1945, the Canadian government started a new bonds program, the Canada Savings Bonds. The government was selling Canada Savings Bonds, which were similar to Victory Bonds, through the Bank of Canada. The Canadian government brought back these bonds in 1945 due to their success in the war. This time, the government was using the program to help manage national debt.

Many Canadians decided to invest in these bonds from the Bank of Canada because they were low-risk and came with a guaranteed minimum interest rate.

At their height, these bonds were collectively worth $55 billion in 1987. By 2015 they were only worth $6 billion. The extreme decline in their worth led the Government of Canada to end the program in March of 2017.

The Bottom Line

Although you can no longer buy a Canada Savings Bond, their legacy lives on. Many Canadians still hold some of these bonds and are waiting for 2021 when they will reach maturity to cash them in. Once that date hits, what happens next?

Many Canadians have already turned to invest in other, more profitable areas. The first type of investment that most Canadians have is a high-interest savings account. They are one of the most low-risk ways of investing as you are simply depositing your money into the account and letting it grow. Aside from minor account fees, you will likely not lose anything from this investment. Guaranteed Investment Certificates are another great, low-risk way of investing.

If you are looking for something more profitable, however, investing in ETFs may be the best option for you. ETFs help provide Canadians with a diversified investment portfolio while still being fairly low-risk. As you are investing in various stocks, bonds, and commodities through ETFs, you have more of a chance to make money.

The Canada Savings Bonds program may be almost over, but the history and lessons in investments we learned from them doesn’t have to die with them. With so many great, low-risk investment options available still, don’t be scared to put your funds out there! Keeping them locked away with no earning potential isn’t helping anyone. Branch out and invest in something today!