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A three-step plan for the first-time home buyer who plans to get in the housing market at some point in the next five years:

Step One: Open a tax-free First Home Savings Account at an online brokerage

Step Two: Choose an investment savings account.

Step Three: Add money to your investment savings account at every opportunity.

If you plan to buy a home in the next five years, the stock market is no place for your down payment money. While there’s potential in stocks for double-digit returns, an ill-timed market correction could wipe out all your gains and a good chunk of your principal.

Alternative banks offer interest rates of 2.5 to 4.1 per cent these days on their conventional savings accounts, which isn’t bad for a virtually risk-free vehicle. But you can get better returns from investment savings accounts, while keeping the same level of safety.

Investment savings accounts come packaged as mutual funds and exchange-traded funds. Let’s focus on mutual fund-style investment savings accounts to start because you can buy and sell them at no cost, and because your holdings are likely eligible for protection from Canada Deposit Insurance Corp. If you want a safe, no-cost way to build a down payment in an FHSA, these accounts are pretty much ideal.

One online broker that offers FHSAs is RBC Direct Investing. RBC DI restricts you to an in-house investment savings account (fund code RBF2010) that pays 4.3 per cent, but it’s widely accessible in that the minimum upfront investment is just $500.

Investment savings accounts packaged as ETFs have yields around 5 per cent, but there are some issues to consider. They’re not covered by deposit insurance, although assets are held in savings accounts at Big Six banks. Further drawbacks with HISA ETFs: Some brokers charge as much as $9.99 to buy and sell them and three brokers, BMO InvestorLine, RBC Direct Investing and TD Direct Investing, block clients from buying them. Also, there’s some risk that financial regulators may take steps that end up reducing returns on these products somewhat.

If you want investment savings account ETFs for an FHSA, try the online broker Questrade. You can buy ETFs at no cost through Questrade, but fees starting at $4.95 apply when you sell. The ETF companies offering investment savings accounts include CI, Evolve, Horizons, Ninepoint and Purpose.

Expect the interest rate on investment savings accounts to decline when the Bank of Canada begins to lower interest rates. For now, they offer people saving for a home down payment a nice blend of decent return and low risk

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Rob’s personal finance reading list

Cool toys, but they break

J.D. Power notes a growing trend of quality issues with new cars and trucks. Safety systems are an issue, as are audio systems, cell phone charging and, believe it or not, door handles. Here’s a ranking of vehicle manufacturers by initial quality.

Cruising for bargains

A tutorial on how to save money when booking a cruise, using the example of a Caribbean cruise that departed from Vancouver. The bogger who wrote this piece saved $2,400.

What’s up with pre-nups?

Lawyers report an increase in the number of young couples signing pre-nuptial agreements before marrying. There are some fascinating demographics behind this trend. People are marrying later in life and bringing more financial assets to the union.

Can you help me with my investments?

A great post from Michael James on Money, one of the original and most thoughtful investing blogs for a Canadian audience. It’s written as if the author is talking with a family member about providing investment help. The part about the psychology of wanting to sell in a down market is right on the money.

Ask Rob

Q: I travel a lot with work and am frequently asked if I wish to pay in Canadian dollars or the local currency when checking out of the hotel or even some restaurants. My understanding is that these establishments charge above the average international exchange rate but was wondering what you or your readers have found?

A: Preet Banerjee has an answer for you in this column he wrote recently for The Globe. Preview: You are correct.

Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.

Journalism callout

Are you living with roommates you didn’t know before? Finding a roommate in college or university is easy. But at older ages it can get tricky. These days, exorbitant housing costs are forcing a growing number of adults to room with strangers. If that’s you, we’d love to hear about your experience: Did you find the perfect roomie match? If so, what did it take? If you’re up for an interview and OK with the Globe using your full name, please reach out to Globe reporter Erica Alini at

Tools, Explainers, Guides and Charts

A tutorial for first-time home buyers trying to get into an expensive market.

The Money-Free Zone

The Sam Dees album The Show Must Go On dates back to 1975, but it’s like a lot of soul music from that era in that it sounds fantastic today. Dees was a singer, songwriter and producer who really nailed it with this album. Come Back Strong, an anthem, is a great place to start. AllMusic describes Dees as “the best R&B songwriter and soul singer that most people have never heard of.”

From the Twitterverse

I asked if the problem in real estate is that houses cost too much, or the people expect too much?

In case you missed these Globe and Mail personal finance-related stories

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