I'm a 22 year old university student.

My summer internship has left me with a single lump payment that is about 2x my yearly expenses. It's currently sitting in my regular account which I use for daily purchases.

I have no financial goals in the foreseeable future (don't need a car, not buying a house soon, etc.) nor do I have debts of any kind.

I already have money in a medium risk investment account run by Fonds FÉRIQUE (A mix of Canadian and American stocks, plus some currencies and other tidbits).

Should I invest the money I don't need immediately and only withdraw it next year when I need it for living expenses or should I simply leave it in my current account?

  • You need to edit your question because a financial advisor would ask you more questions before advising you : when will you need this money, are you single, what is a "medium risk investment". First advice of mine is below.
    – Armando
    Oct 4, 2016 at 3:49
  • @Armando Just edited to reflect that.
    – JS Lavertu
    Oct 4, 2016 at 3:51

2 Answers 2


There are three basic concepts finance (as far as I'm concerned).

Liquidity is basically an asset's spendability. Assets range in liquidity from cash (very liquid) to real estate (not very liquid). You can spend cash immediately, while real estate must first be converted to cash.

Another important concept is your time horizon. When do you need your money. Money you need in the near term should be kept in very liquid assets, while money you won't need for a significantly long time can be tied in to something much less liquid.

Volatility is the degree to which an assets value is predictable from day to day. Cash and guaranteed savings accounts have very low volatility, while a stock portfolio will fluctuate in value from day to day, sometimes a lot and sometimes you can lose your initial investment.

So really, you need to determine what you need or want this money for, and depending on when you'll need it you can make decisions about whether or not to invest it, or keep it in a savings account, or keep it in literal actual cash.

Your TFSA is maxed for the year, so that's out. Do you have an emergency fund? Do you want to travel or have other more near term desires that cost money? If you have a solid financial foundation and already have an emergency fund, you may want to set up a brokerage account and invest in an index fund. You should not invest money in the stock market unless you are ready to leave it there for at least a few years. Stocks are volatile but over a long enough period the market generally goes up.

In your search for the right index fund, watch out for fees. Most big brokers will have a list of funds you can invest in with no up front fees and no commission. The fund itself will charge an expense ratio, look for an index fund with an expense ratio around 0.10%. This means you'll pay 0.10% of your holdings each year to the fund manager.

No matter how much money we're talking about, I wouldn't put more than half in the market. Dip your toe in, get used to the value fluctuating. Don't start reading about technical analysis and derivative trading. Just put your money in a very low fee big market index and let it ride.


Should I invest the money I don't need immediately and only withdraw it next year when I need it for living expenses or should I simply leave it in my current account?

This might come as a bit of a surprise, but your money is already invested.

We talk of investment vehicles. An investment vehicle is basically a place where you can put money and have it either earn a return, or be able to get it back later, or both. (The neither case is generally called "spending".) There are also investment classes which are things like cash, stocks, bonds, precious metals, etc.: different things that you can buy within an investment vehicle.

You currently have the money in a bank account. Bank accounts currently earn very low interest rates, but they are also very liquid and very secure (in the sense of being certain that you will get the principal back).

Now, when you talk about "investing the money", you are probably thinking of moving it from where it is currently sitting earning next to no return, to somewhere it can earn a somewhat higher return. And that's fine, but you should keep in mind that you aren't really investing it in that case, only moving it.

The key to deciding about an asset allocation (how much of your money to put into what investment classes) is your investment horizon. The investment horizon is simply for how long you plan on letting the money remain where you put it.

For money that you do not expect to touch for more than five years, common advice is to put it in the stock market. This is simply because in the long term, historically, the stock market has outperformed most other investment classes when looking at return versus risk (volatility).

However, money that you expect to need sooner than that is often recommended against putting it in the stock market. The reason for this is that the stock market is volatile -- the value of your investment can fluctuate, and there's always the risk that it will be down when you need the money. If you don't need the money within several years, you can ride that out; but if you need the money within the next year, you might not have time to ride out the dip in the stock market!

So, for money that you are going to need soon, you should be looking for less volatile investment classes. Bonds are generally less volatile than stocks, with government bonds generally being less volatile than corporate bonds. Bank accounts are even less volatile, coming in at practically zero volatility, but also have much lower expected rates of return.

For the money that you need within a year, I would recommend against any volatile investment class. In other words, you might take whichever part you don't need within a year and put in bonds (except for what you don't foresee needing within the next half decade or more, which you can put in stocks), then put the remainder in a simple high-yield deposit-insured savings account. It won't earn much, but you will be basically guaranteed that the money will still be there when you want it in a year.

For the money you put into bonds and stocks, find low-cost index mutual funds or exchange-traded funds to do so. You cannot predict the future rate of return of any investment, but you can predict the cost of the investment with a high degree of accuracy. Hence, for any given investment class, strive to minimize cost, as doing so is likely to lead to better return on investment over time. It's extremely rare to find higher-cost alternatives that are actually worth it in the long term.

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