Saving and Investing

• In addition to simply putting money into a savings account, there are three government plans used to help people save money:
• RESP – this is used for education savings, and includes a grant (a “gift” from the government) depending on how much you invest and how much income your family has
• a. This is usually purchased by parents or grandparents, however students can buy them as well
• RRSP – these are used for retirement. You can save money on taxes when you buy them as it reduces your income, however you will need to pay taxes when you withdraw from them.
• TFSA – this is used for general savings. You don’t pay tax on your investment earnings (interest or profit from stocks)
• However, you can only contribute $6000 a year once you have reached the government maximum (as of 2021)
  

• These are government plans. There are other ways you can make or save money.

GIC (Guaranteed Investment Certificates)

• Guaranteed interest rate if you don’t withdraw money for a set period of time (i.e. 3 years)
• Interest rates increase the longer the term is (for example, 1 year could have a 1.4% interest rate, a 5 year could have a 1.9% interest rate)
• This option earns more interest than a simple savings account, but you cannot withdraw your money until the term is up

Stocks

• Stocks are pieces of a company’s worth that the public can buy
• You can buy one or more stocks (AKA shares) through a broker or independently through certain agencies (e.g. WealthSimple)
  
• The value of the shares go up and down frequently based on supply and demand
• If more people are willing to buy a stock than sell it, the price will go up
• If more people are willing to sell a stock than buy it, the price will go down
• This is because there is only a limited number of shares available at one time
• People will likely sell more shares if they hear that a company is not doing well.
• i.e. sales are lower than expected, change in management, new tax rules, natural disasters
• Reasons you may want to buy more stocks in a company:
  
• New products with mass media coverage
• It is often said to “buy low, sell high”
• This means to buy shares when you think they are below what they are worth and have a chance of rising again and selling them when the price goes above what you think will last.

Mutual Funds

• Mutual funds are a pool of investments (i.e. stocks, bonds, cash [essentially a bank account], guaranteed investments)
• You can buy one or more “units” or shares of a mutual fund (unlike stocks, these are not for one particular company but for a “block” of the shared investments)
• The value of each unit is the total value of the pool of investments divided by the number of units that have been sold
• The value goes up and down depending on how the total investments are doing in terms of value
• They are created to meet certain consumer goals – i.e. technology, banking, ecological, etc.
• These are more stable than buying stocks in general.

Savings Bonds

• Have a guaranteed interest rate that is backed by a government
• Sold by governments to raise money
• Investments in the government
• Very safe but with a low interest rate (still greater than a bank account)