In 1981, the safest investment imaginable paid 19.5 per cent.
Now discontinued, Canada Savings Bonds had a run of decades as a trusty way to save money safely. But CSBs were never better than in ‘81, a year when out-of-control inflation hit 12.5 per cent.
Inflation’s running at 8.1 per cent today in Canada and it reached 9.1 per cent last month in the United States. But the best rate you can get on safe savings is 3 per cent for a high-rate savings account and roughly 4 to 5 per cent on a guaranteed investment certificate.
There’s a strong argument against saving today in that your after-inflation return is negative. Pay it no mind. By saving – or more precisely, not spending – we help reduce inflation and the need for the kind of shock interest rate hikes we saw last week.
When the Bank of Canada raised its overnight rate by a full percentage point to 2.5 per cent, it was the…