Savings and Investing How to make your money grow….

Alexa von Tobel

Savings and Investing Saving means putting money aside for future use Investing is using savings to earn extra income It is a good idea to combine both savings and investing in a financial plan

Why People Save Many reasons including: emergency needs short- and long-term goals (bike, TV, car, home) security and future needs (retirement)

Financial Goals Savings plan ensures that a certain amount of money is put aside on a regular basis to reach a financial goal Pay Yourself First Decision on how much money and when to put away money for future use depends on your goals (short term or long)

Selecting a Savings Plan Benefits of Savings Plans Interest (rate of return or yield – expressed as a %) Safety and insured against loss Liquidity

Saving Terms Safety :Canadian Deposit Insurance Corporation (CDIC) protects depositor’s funds in banks up to a max. of $ Liquidity: the ability to convert an asset or investment into cash quickly and easily Interest: paid to the account holder for the use of the money. Interest is also paid by the person borrowing the money Rate of return is interest expressed as a percent of the original investment. It is also called yield. ($1000 x.05 = $50) or ($earned/$ invested *100)

The 4 Types of Savings Plans Saving Account (regular bank account) Bank’s take deposits and lend out as loans GIC (Guaranteed Investment Certificate an example of a term deposit) Savings plans in which a fixed sum of money is deposited over a specific length to time Guaranteed fixed rate of interest

Types of Savings Plans RRSP (Registered Retirement Savings Plan) Not an investment but a tax shelter Government does not count your money you put into RRSP as income on your taxes that year you contribute and you don’t pay taxes on your RRSP money until you withdraw it out RESP (Registered Education Savings Plan) long term savings plan to help finance a child’s education Money can only be used for school

Difference between Saving & Investing Liquidity Degree of risk Rate of return Stability of return Protection against economic changes

Six Types of Investments 1.Bonds a. - “IOU” (a promise) to repay borrowed money on a certain future date along with interest 2.CSB (Canada Savings Bond) a.loan made by an individual to the government of Canada 3.Stocks a.When an individual buys stocks, they become part owner or a shareholder in the company

Types of Investments 4.Mutual funds a.a.pooled money that is invested in stocks b.Allows small investors to take advantage of professional management and diversification 5.Real Estate (i.e. Land, house etc) a.Besides buying a home as a form of investment in real estate, some people buy income property (apartment, cottage) 6.Collectibles a.items of personal interest to a collector b.may increase in value over time due to the scarcity of the item or the demand in the market (Classic cars, art)

Risk vs. Reward

Make Your Money Work 4 You ●Remember : Simple interest and Compound interest Compound Investment Video (Remember this from simple and compound lesson???)

Power of 72 Divide 72 by the interest rate to find out how many years you need for your money to double $5000 in account earning 6% = 72/6 = 12 years to double money

Business Investments 3 Main Reasons Why Businesses Invest Businesses can invest excess cash (usually at a low risk but highly liquid) until it is needed. Excess cash can be invested to generate income. Business can invest strategically by purchasing another business.

“savings without a plan means slowly losing money”

1. List one short-term goal and explain a savings or investing strategy to help you reach that goal. 2. List one long-term goal and explain a savings or investing strategy to help you reach that goal. 3. Explain the difference in risk to saving versus investing. Does savings or investing have the higher rate of return? 4. Discuss your reaction to this statement: Even though you have long-term goals, it is still important to have short-term savings.