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What does really matter if sandra puts in a rainy day

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Sandra Chan, 22, has just moved to Winnipeg to begin her first professional job. She is concerned about her finances and, specifically, wants to save for a "rainy day" and a new car purchase in 2 years. In order to finance her move, Sandra had put aside some money. Now that her move is finished, Sandra has $1000 remaining in her chequing account at the bank. Sandra is unsure if she should put this money aside in a "rainy day" fund, or if she should put this money aside for a new car purchase.

Sandra has reduced her savings options to four choices:eave the $1000 in her chequing account where it will earn 0.25% per year.

  1. Deposit her $1000 in an online investment savings account where she will earn 1.35% per year.
  2. Invest her $1000 in a Canada Premium Bond that pays interest of 1.00% per year.
  3. Invest her $1000 in a Guaranteed Investment Certificate (GIC) that pays interest of 1.50% per year.

Problem 1: Which short-term investment is most appropriate for Sandra's situation?

Problem 2: Assuming Sandra remains unsure as to what she will do with the $1000, does it really matter if Sandra puts her $1000 in a "rainy day" fund or a "car purchase" fund?

Reference no: EM132907751

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