Presentation on theme: "Who Wants to Become a Millionaire?. Savings vs. Investing Savings: Putting $ aside (mattress, bank account, jar, piggy bank etc.) to reach a particular."— Presentation transcript:
Savings vs. Investing Savings: Putting $ aside (mattress, bank account, jar, piggy bank etc.) to reach a particular goal RISK FREE MONEY DOESN’T GROW ALWAYS AVAILABLE ALWAYS AVAILABLE
Saving vs. Investing Investing: The act of committing $ in order to gain a financial return The act of committing $ in order to gain a financial return LOW TO HIGH RISK MONEY GROWS! NOT ALWAYS AVAILABLE
Before We Begin… Capital Gain: Money earned on an investment In Canada, most capital gains must be declared at tax time as income earned
Types of Investments Guaranteed Investment Certificate/Term Deposits Registered Retirement Savings Plan (RRSP) Registered Education Savings Plan (RESP) Bonds Mutual Funds Real Estate Collectibles Tax Free Savings Account
Term Deposit & GIC An investment that pays a fixed amount of interest for a fixed amount of time Term Deposit = Usually less than 1 year GIC = Greater than 1 year
Registered Retirement Savings Plan (RRSP) Plans that help individuals set aside money to be used after they retire Major tax break: Don’t have to pay tax on money put into it! Income tax is paid when $ is withdrawn
Registered Education Savings Plan (RESP) Investment designed to help parents finance their children’s post-secondary education Gains made on RESP grows tax-free until the child is ready to attend school Government will contribute 20% on the first $2000 contributed yearly (=FREE MONEY!)
Bonds An IOU certifying that you loaned money to the government or a corporation and outlines terms of repayment When bond expires, principal + interest is paid back Government Bonds = Canada Savings Bond Other: Corporate Bonds
Mutual Funds A professionally managed portfolio made up of a variety of investments Managed by a professional Buy into the fund and the fund manager uses this money to buy more investments Gains depend on how much originally invested
Real Estate Flip that house! Buy property (land, house) and hold onto it until the value rises OR Buy a property and rent it out
Collectibles Purchase something you think will be of greater value in the future E.g. hockey cards, stamps Antique Road Show!
Tax Free Savings Account (TFSA) New! Allows Canadians to put up to $5000 annually into an account and not pay taxes on the money contributed Can choose to invest money put into account into a wide range of investments and investment income is tax-free!
Questions to ask when investing…. Expected Return: Overall profit or interest (%) you might expect to receive from your investment Risk: The degree of uncertainty about your expected return Liquidity: The ease & speed with which you can convert the investment to cash
Risk Vs. Return Every investment has some risk associated with it HIGHER RISK = HIGHER RETURN LOWER RISK = LOWER RETURN
Rule of 72 The approximate length of time it would take for an investment to double 72/interest rate = # of years to double E.g. 12% interest rate 72/12 = 6 years 72/12 = 6 years