Who Wants to Become a Millionaire?

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  Income tax is paid when $ is withdrawn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