Why Do We Think We Can Own More Stuff than Our Parents?

When I sorted out today’s mail, I found a flyer for what looked like living room furniture. It looked pretty and comfortable with thick padded cushions. It was pricey: a club chair for $699, a loveseat for $1499. A closer glance surprised me: it was furniture for outdoors, not indoors. And it made me think back to the stuff my parents could afford to own.

Flashback to the Past

When I was growing up we also liked to eat picnics and bbq’d meals outdoors. We sat at a triangular-ish redwood stained cedar picnic table. My Dad had made it himself. It was more comfortable than our friends’ tables because the benches were detached and you could move them in or out. No one had to sit where the table struts were either. Luxury!
We also had an assortment of aluminum deck chairs that you could fold up. They had nylon webbing to form the seat and back. Things fell easily through the gaps in the webbing and it could stick on humid days. Not great, but we still used them.

For lounging, we had cotton canvas recliners. They also had an aluminum frame and the canvas was attached with little ties along the sides. They, too, could be folded and put away or put into the station wagon to go to the beach or a party.

I doubt that if you added up the cost of all of this outdoor “furniture” you would have paid $699 even allowing for all the inflation during the interim.

What I remember most about those times spent outdoors was the fun: playing lawn darts and badminton; chasing fireflies; playing hide–n–go-seek in the dark with flashlights; eating slightly singed smoky marshmallows; laughing till our faces hurt.

But of course that was then, this is now!
I can hear what someone must be thinking (or else none of this furniture would be selling.) Someone must be thinking: But now things are different. We can afford/want/need nicer things. That old stuff was ugly, uncomfortable and tacky.

The trick is: can we afford it?

My parents were both professionals. Their combined income was quite reasonable. They weren’t as well to do as the doctors and lawyers but we were comfortable. Now, in retirement, they are mildly affluent. They certainly were not blue collar or working class or just getting by or whatever label you use to describe the majority of the work force.

I keep reading snippets in the news that tell me that, adjusted for inflation, average families are now earning less than they were ten years ago.

So why do some people who are earning less think they can afford more than their parents?

That’s not even including all of the disposable technology costs that burden this newer generation. My parents’ generation didn’t have monthly cell phone bills, internet bills, or the costs to upgrade cell phones, computers, laptops, tablets, and gaming consoles every 3-5 years.

So if the pundits are correct, and the average income is down and the average costs (for new technology) are up, where is the money supposed to come from to pay for all this luxury outdoor furniture?

I wish I could say it’s all being sold to the doctors, lawyers and CEOs. But I have a bad feeling there are a lot of teachers, mechanics, shift workers, retail support workers and other “real” people who are trying to afford this stuff.

I hope against hope that the word “credit” is not crossing any of their minds and that the phrase “saving for the future” is. I don’t think I’d want to be facing retirement on an average CPP and OAS pension and nothing else. Not even for the most comfortable backyard bbq furniture in the world. Especially since it’s not the furniture I remember from our gatherings, it’s the people and what we did.

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Do you think we’re being offered too many ways to spend our money on things that won’t last and that we don’t really need to enjoy life? Or do you think we can have it all, maybe by just skipping our lattes on Tuesdays? Please share your views with a comment.

Investing in the AAT770 Daily High Interest Savings Account Fund, HISA, for BMO InvestorLine RRSP, TFSA and Other Accounts

Sometimes you have cash sitting around in your investment account. You may be waiting for a market pullback. You may be waiting for fixed income rates to improve before locking in for a longer term. You may need to make a withdrawal from your RRIF or your TFSA soon and need to keep the money handy in cash. Till recently, that meant getting no interest at BMO InvestorLine, or getting a very low interest rate if you could risk locking the money in for 30 days in a cashable GIC with a minimum $10,000 investment. Or, if you had $25,000 or more, you could have purchased units of a high interest savings account fund such as ATL5000. Now, in April 2013, BMO InvestorLine is offering a new choice in daily high interest savings accounts with a somewhat better minimum.

A Vote of Thanks to a Reader for Highlighting this New Option

I’d just like to publicly thank John who pointed out this new option is available. It is much appreciated both by me and I’m sure by other readers!

Investing in BMO AAT High Interest Savings Account Funds

The new offering is two funds:

  • AAT770 the BMO AAT CAD High Interest Savings Account
  • AAT780 the BMO AAT USD High Interest Savings Account

Each fund has a value of 1.00 dollars per unit. AAT770 is Canadian dollars. AAT780 is US dollars.

What is the “High” Interest Offered on These Funds?

“High” in these days of record low interest rates is a bit of a stretch.

UPDATE: On October 3, 2017, AAT770 is paying 0.95% and AAT780 is paying 0.5%.
UPDATE: On March 18, 2017 AAT770 is paying 0.75% and AAT780 is paying 0.5%.
UPDATE: On January 29, 2014 AAT770 is paying 1.25% and AAT780 is paying 0.25%.
UPDATE: On November 2013, AAT770 is paying 1.25% and AAT780 is paying 0.20%.

The rates offered as of April 11, 2013 are: AAT770, 1.27% on Canadian dollar investments;AAT780, 0.25% on US dollar investments.

What is the Minimum Investment Required to Buy Units in AAT770 or AAT780?

For both funds, the minimum initial purchase is $5,000. Subsequent purchases can be $500 or more. UPDATE: 2017 10 03, minimum purchase is $1 000 and subsequent purchases can be $50 or more.

While I haven’t tested it yet, I expect to find that you must keep a minimum balance of $5,000 (UPDATE now $1000) per fund. With the old $25,000 minimum funds like ATL5000, if you tried to sell a few units and drop below a holding of $25,000 it would refuse the transaction, telling you to either sell all or none.

I will test this minimum in the future, but first I have to buy some!
[UPDATE: As of April 2013 when I tried a partial sell that would take my balance below $5000 the system would not let me enter the order. It said I had to keep a balance of $5000 or sell all.]

I have tested whether the system will let you purchase less than $5000. It won’t.

NOTE: Although a $5,000 minimum is much better than the previous $25,000 minimum required by InvestorLine, it’s still quite high. You can invest in ATL5000 with a $1000 minimum at CIBC. UPDATE: As of 2017 10 03 you can also invest in AAT770 with a minimum of $1 000.

Is There an Early Redemption Fee for AAT770 or AAT780?

As with ATL5000 there should not be an early redemption fee. I will also be testing this in future.
[Update: As of April, 2013 I redeemed all units in my RRSP account. There was no fee deducted from my account either for the buy or the sell. I redeemed fewer than 7 days after purchasing.]

However, with any daily interest product the interest is calculated daily but paid monthly. So if you redeem all of your units before the interest is paid for that month, you will forfeit that interest. This is similar to withdrawing all of your money and closing a daily interest bank account. (I hope to test the options Cash and Reinvest, however. Perhaps you can still get your interest paid out to your cash account even if you sell all of your units before month end. I will report on that if and when I get a test done.)

[Update: To my amazement, when I did a test redemption in April 2013, they actually paid out the interest accrued during the very short time (less than 1 month) that the money was invested. Apparently I’ve been wrong about this and I apologize to BMO InvestorLine for my misguided thinking.]

Is There a Commission or Fee to Buy AAT770 or AAT780?

There does not appear to be any fee or commission to purchase these units. The fund is described as “No Load” on the purchase order screen. I will be testing this, too.
[Update: I did a purchase and sale within a few days of each other and was not charged any fees in April 2013.]

What Next?
I’m off to test the product with a buy and, after it settles, a sell. I also want to make a buy and hold it to see how the interest gets paid.

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PLEASE share your experiences with high interest savings accounts at InvestorLine or other online brokerages. One reader already brought this new option to light through a comment. Your thoughts may be equally useful to other investors.