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FINANCIAL LITERACY
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Introduction-Facilitator
CONTACT INFO:
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Introduction
• What is your name?• What would you like to learn from this program?
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Overview
$ MONEY - What is it? What do we do with it?
Budgeting -How do we use it? How do we find more money?
Save it (Money in) Spend it (Money out)
•Savings•Investing basics•Educated Consumer•Banking
•Credit & Credit cards•Debt & Financial Woes•Credit Bureau, Ratings, Scores & Reports•Income Tax basics
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Module One: Exploring Your Relationship with
Money
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Money
What is Money?
Discussion/Activity
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Money Messages
“ Our feelings about money today almost always can be traced back to an incident from our past, our first experience or message about money” - Suze Orman
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Money
What is your first memory of money?
Discussion/Activity
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Money
If I give you $1,000,000What would you do with it?
Handout/Activity
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Money
If I give you $10,000What would you do with it?
Handout/Activity
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Activity – 5 mins
Rate yourself from 1-10 on your current financial knowledge
1= Very Low10 = Very High
Handout/activity
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Money
In groups, make a list of what would happen if you do not know how to manage your money.
Handout/Activity
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Goal Setting
• Important to set goals• Write them down• Start with the end result in mind• Build a plan to reach your goals• Goals should be SMART
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Goal SettingSet goals to apply what you learned today.Remember, goals should be SMART• Specific• Measurable• Achievable• Realistic• Timeframe Attached
Handout
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Module Two: Budgeting – Developing a Money
Action Plan
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Budgeting – Module 2
• What is budgeting?• Budgeting exercise • Budgeting tips• Goal setting
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What is Budgeting?
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Spending Money
What do you spend money on?
How do you make sure you don’t spend too much?
BUDGETING!
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What is a Budget?• A plan for your money• Detailed or simple to use – your choice!• A big picture of where your money comes from – and
where it goes• A way to identify spending or saving that you may
want to change• A way to work towards your future financial
goals…..and more!
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Steps to Making a Budget
• List your income• List your expenses• Determine if you have any money left over• List your debts • Decide how much money you can put
towards your debt• Make short and long term goals• Be sure to include savings in your budget
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Budgeting Activity
As a group of 3 or 4 complete the budgeting sheet based on a scenario.
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Activity – Create a budget! (10min)• Scenario 1
Single motherOn social assistanceNon-smokerMonthly income (~$1200)
• Scenario 2Single guyMakes minimum wageSmoker Wants a carMonthly income (~1280)
Activity
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Activity – Create a budget! (10min)
• Scenario 3Married father of 2Works full-time for $15/hrHas credit card debt of $5,000Monthly income ($2400)
• Scenario 4 Married, no kidsBoth work full timeAnnual income of $60,000Monthly income ($5000)
Activity
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Practice Makes Perfect!
• What did you learn from this exercise?• Were you realistic?• Did anyone include savings in their budget?
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Benefits of Budgeting• You have a plan for your money• Less stress• Compare one month to another• See how your spending habits affect your
budget• Find ways to save money• Use last month’s budget to plan for the next
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Budgeting Tips• Keep your budget flexible• Keep your budget simple• Be honest and realistic• Try keeping track of every dollar you spend for a month…
it may surprise you!• Requires some trade-offs and sacrifices • Budget for the unexpected• Budget for large items that occur once a year• Keep accurate records
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Do you know where these things are?
• Birth certificates/other ID /Social Insurance Card• Lease / Mortgage documents• Tax papers / Receipts for taxes• Banking / Investment statements• Insurance documents• Warranties/guarantees for items purchased• Receipts for major purchases• Final will and testament
Handout
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Module Three: Savings
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Savings – Module 3
• Needs vs. Wants• “Finding Money” activity• Paying Yourself First!• Compound Interest• Goal Setting and Resources
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Introduction to Saving
FACT: An adult who invests $1,000 a year for 7 years between the ages of 19 and 26 and then invests nothing more will have more money at 65 than one who waits until he turns 26 to invest $1,000 a year, every year, for the following 40 years!
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Finding Money
• Write down how oftenyou buy the item
Daily? Multiply by 30 Weekly? Multiply by 4
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How often do you buy the item…
If Amount Is: Then:Weekly Multiply by 4.33Every Two Weeks Multiply by 26; Divide by 12Twice a Month Multiply by 2Four Times a Year Divide by 3Twice a Year Divide by 6Once a Year Divide by 12
Handout/Activity
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Finding Money Activity!!Write a list of things you buy oftenFor example:• parking..• Coffee..• Convenience purchases..• Magazines/newspapers..• Gas..• Cigarettes/alcohol..• Renting movies..• Downloading songs, videos, texting messages
Handout/Activity
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Finding money…
What can you do with this money?
•Spend it•Save it
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Look at this!
Save this week: At % interest: In 10 years you’ll have:
$7.00 3% $4,234
$14.00 3% $8,468
$21.00 3% $12,702
$28.00 3% $14,560
$35.00 3% $18,200
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What is the Golden Rule of Saving?
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Pay Yourself First!!!
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The Magic of Compound Interest
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Compound Interest• Interest paid on original amount PLUS any
interest earned
Example: $100 paying 6% compounded annually
Year 1 $100 x 1.06 = $106Year 2 $106 x 1.06 = $112.36Year 3 $112.36 x 1.06 = $119.10Year 4 $119.10 x 1.06 = $126.25Year 5 $126.25 x 1.06 = $133.83
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Are they needs or wants?
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Activity
• List as many things as you can think of that you need to buy
• List the things you want to buy
Handout/Activity
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Needs vs. Wants
What’s the difference between a “need” and a “want”?
Discussion/activity
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Needs vs. WantsA need is something you must have to live
your daily life. Food,clothing, and shelter are the usual needs.
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Needs vs. Wants
A want is a way to meet these needs with more style, comfort, or ease.
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Why Save Money?
• To buy large items (vehicle/house)• Surprise Bills or Emergencies• More Choices (vacations, new wardrobe)• Retirement• Help family• Children’s Education • Less Stress
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Saving is a Habit
• Start small• Don’t dip into savings• Try forced savings technique
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Saving EarlyAs an example….
MR. START EARLY saves $3600 per year for 7 years in an investment earning 8% interest
MR. WAIT LONGER starts saving $3600 per year for 17 years in an investment earning 8% interest, 7 years LATER than Mr. Start Early.
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Saving EarlyMr. Start Early Mr. Wait Longer
Age Yearly Contribution Total Accumulation Age Yearly Contribution Total Accumulation
25 $3600 $3888 25 0
26 $3600 $8087 26 0
27 $3600 $12622 27 0
28 $3600 $17520 28 0
29 $3600 $22809 29 0
30 $3600 $28522 30 0
31 $3600 $34692 31 0
32 $37467 32 $3600 $3888
33 $40465 33 $3600 $8087
34 $43702 34 $3600 $12622
35 $47198 35 $3600 $17520
36 $50974 36 $3600 $22809
37 $55052 37 $3600 $28522
38 $59456 38 $3600 $34692
39 $64212 39 $3600 $41355
40 $69349 40 $3600 $48552
41 $74897 41 $3600 $56324
42 $80889 42 $3600 $64718
43 $87360 43 $3600 $73783
44 $94349 44 $3600 $83574
45 $101897 45 $3600 $94148
46 $110048 46 $3600 $105567
47 $118852 47 $3600 $117901
48 $128,361 48 $3600 $131,221
Total Contribution Total Contribution
$25,200 $61,200
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Small Changes = Big Money
What if you can make small changes in your spending habits and start saving X amount of money per day or per week?
Can you cut down on the following?Sodas, Cigarettes, Lattes, Cable TV, Cell phone bill, Games,
Bottled Water, Sweets, New Gadgets, Shopping, Driving a big car, Eating out…
$497,107 $994,215
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BUT….What if you are the one paying the interest?
Guess how much a $200 guitar bought on a credit card with 28% interest cost after 4 years?
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What that guitar really cost !!!
$536.87
Year 1 $200 x 1.28 = $256Year 2 $256 x 1.28 = $327.68Year 3 $327.68 x 1.28 = $419.43Year 4 $419.43 x 1.28 = $536.87
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Set Goals and Make Plans
Think about a timeline for your savings goals…. For this week….for next month…AND…
• Short Term 1-5 years• Mid Term 5-10 years• Long Term 10-20 years
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Goal SettingSet goals to apply what you learned today.Remember, goals should be SMART• Specific• Measurable• Achievable• Realistic• Timeframe Attached
Handout/Activity
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Banking and Alternative Financial Services
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Banking – Module 4• Introduction to Banking • The “Unbanked”• Alternative Financial Sector• Opening a Bank Account• Comparison of Bank Accounts• Banking Tips• Goal setting and Resources
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Introduction to Banking
• Safe place to keep money• Won’t lose your money accidently• No one can steal your money.
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Introduction to Banking
Why do you bank where you do?Reasons:
handout
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Introduction to Banking
• How many people have a bank account?• Why do you bank where you do?
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Introduction to Banking
• The Canadian government insures the accounts in trust companies and most banks up to $100,000.
• The provincial governments insure the accounts in credit unions (from $100,000 to all the money).
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Introduction to Banking
• There are also a variety of financial services available outside of banks and formal financial institutions.
• These services are often referred to as the Alternative Banking Sector.
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Introduction to Banking
• If the bank has a problem and it closes, then you get your money back.
• Canadian branches of foreign banks and a few Canadian banks are not covered by Canadian government insurance.
• The bank must tell you if it is not covered by government insurance.
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The Alternative Financial Sector
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Alternative Financial Sector
What are some examples of Alternative Financial Services?
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Cheque-Cashing Outlets• Cash pay cheque or government cheque• High interest plus a fee • Examples….
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Cheque-Deferral Services• Cash advance on next paycheque• Short term loan (2 weeks)• Very high interest rate ( for example: 470%)
• Example…. $300 for two week loan= $54 interest
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Rapid-Refund Tax Services
• Provides instant refund• Could be 20% – 30% of your refund
Example…Preparation Fees………………….$100Electronic Filing Fee……………...$ 40Refund Loan Charge……………..$ 125Padded Loan Fees………………..$ 35Cheque-Cashing Fee ………up to $200Total…………………………………$500
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Pawn Shops• Charge high interest for loans based on value
of an asset• When you repay the loan plus the interest,
you get your collateral back• Don’t pay back = Lose collateral• Interest paid e.g. 264%
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Pros and Cons of Banks and AFS
• Why do some people choose not to have a bank account?
• What are the PROS to having a bank account?• Why are some people “unbanked” How can
this negatively affect them?
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What kind of Bank Account is for me?
What is the feature you like best about your bank?
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What Kind of Bank Account is for Me?
• Convenience• Low fees• ATM, phone, internet or in-branch• Monthly transaction limit• Cheques• Statements or passbooks• Interest• Youth or Senior• No fees for maintaining monthly balance
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Other Banking Features• Hold• Direct Deposit• Direct Payment• Cheques
• Post dated cheque• NSF (penalty fees)• Blank cheque• Certified cheque• Stop payment
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To open a bank account: • Don’t need to have a job• Open an account at a bank, a trust
company, or a credit union.
Opening a Bank Account
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You will need 2 pieces of identification• Drivers license issued in Canada• Canadian passport• Certificate of Canadian Citizenship• Certification of Naturalization• Permanent Resident card• Citizenship and Immigration Canada Form IMM 1000 or IMM 1442• Birth certificate issued in Canada• Social Insurance Number• Old Age Security card• Certificate of Indian Status• Provincial health insurance card
handout
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Reasons Why a Person May Be Declined a Bank Account…
• Possible illegal or fraudulent purposes• History of illegal or fraudulent financial
activity in past 7 years• Believes you made false statements• Believes employees would be subjected to
harm• Refuse to consent to bank verifying
identification
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Banking Tips!
Things to think about…
handout
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• What are the PROS and CONS of internet banking?
Internet Banking
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Sending Money Abroad
How do you send money abroad?
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Goal SettingSet goals to apply what you learned today.Remember, goals should be SMART• Specific• Measurable• Achievable• Realistic• Timeframe Attached
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Educated Consumer
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Consumerism - Module 5
• Introduction • Sales Techniques• Frauds and Scams• How to Handle a Consumer Problem• Goal setting and Resources
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Educated Consumer
Can you find an ad that has made you want to buy a
product?
Handout Flyers/Activity
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Surrounded by Messages
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Surrounded by Messages
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Recognizing The Tricks of the Trade
1. What promises are they making?2. Is the advertising misleading at all? 3. Would you buy the previous advertised item
based on the information provided?
Activity-Flyers
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Sales Techniques
What is the difference between advertising and a sales technique?
Handout
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Sales Techniques• Guarantees• Scarcity• Contrast & Compare• Scientific/Numerical Claims• Negative option
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Frauds& Scams
What are some common types of FRAUD?
handout
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How to Handle a Consumer Problem
If you get ripped off or scammed…
What should or can you do?
Where can you go for help?
handout
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Goal Setting
• As a consumer, is there something you can do to make better choices?
• Is there a situation you would like to resolve using some of the smart consumer strategies?
• Write it down!
Handout activity
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Goal Setting
Goals should be SMART
• Specific• Measurable• Achievable• Realistic• Timeframe Attached
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CREDIT & CREDIT CARDS
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Credit/Credit Cards – Module 6
•Credit 101: Types of Credit•Good & Bad things about credit•Consequences of Misuse•Interest Rates•How much can you afford?•Credit cards•Goal setting and Resources
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Types of Credit/Debt
Credit cards Charge accounts Consumer loans Mortgage loans Business loans Installment buying
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Sources of Credit
Family and friends Financial institutions Mortgage and loan companies Retailers Yourself Credit unions
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Building Credit History
In small groups discuss:How can someone build a credit
history?
Handout/activity
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The Good Things about Credit…
Handout/activity
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The Bad Things about Credit…
Handout/activity
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Credit
How can credit use turn ‘ugly’ or get out of control etc?
How do you know when you are “in over your head’?
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Before… and AFTER!
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“over your head…”
• Collection agencies• Repossession of Goods• Garnishment of Wages• Bankruptcy
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Bad Credit Rating
Negative credit rating at the credit bureau will affect your ability to be approved for the following:– credit card– personal loan– small business start-up loan – lease or rent to own a product– buy a house/get a mortgage. – landlord can do a credit check and deny your residence. – can affect your chances of getting certain jobs if your prospective
employer does a credit check.
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Interest Rates
- rate which is charged or paid for the use of money.
- annual percentage of the principal (which is the amount of a debt on which interest is calculated).
- calculated by dividing the amount of interest by the amount of principal.
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Interest Rates
• For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000,
• 90 divided by 1000 = .09• .09 x 100 = 9%
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Before taking a loan…consider:
• make sure your debts and the interest you pay do not get out of control.
• Find out how much total interest you will pay • How much will the item cost you over time
once you add interest and fees and charges.• Ask what the interest rate is.
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What else affects the costs of credit?
• The amount of money you put down on a purchase affects how much money it costs you to borrow money
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For Example:• purchase a $3,000 car • $1,200 as a down payment• borrow $1,800 ( pay interest on the $1,800). • The cost to repay the loan will be $1,800 plus
the cost of credit.• The higher your down payment, the less you
will need to borrow and the less your total cost will be.
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Tips For Smart Credit Use
• Once you get credit, you still need to think about how to best make it work for you. Consider credit a tool to help you reach your goals. Here are some tips around credit use:
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Credit Cards
• Watch impulse buying. • Compare price and value• Don’t use too many credit cards. • Keep track of all credit card purchases• Pay off your credit card balance in full
every month.
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Loans/Lines of Credit
• Pay attention to loan prices• Make large down payment • Be careful of co-signing or guaranteeing a
loan on behalf of others.
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SHOPPING FOR A CREDIT CARD
• What are the key considerations you should look for when shopping for a credit card?
Handout/activity
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Tips - Credit Card Do’s and Don’ts
• Shop around• Look at various sources, such as banks, credit
unions, retailers• Read the contract carefully; understand the
terms and the fine print• Don’t rush into signing anything• Once signed, get a copy of the contract and
keep for your records
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Tips - Credit Card Do’s and Don’ts• Know the penalties for missed payments• Figure out the total price when paying with
credit• Make the largest payments you comfortably can• Buy on installment credit only after evaluating
all other possibilities• Don’t be misled into thinking small payments
will be easy
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Goal Setting
Goals should be SMART
• Specific• Measurable• Achievable• Realistic• Timeframe Attached
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Debt & Financial Woes
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Debt/Financial Woes - Module 7•Warning signs of trouble•Activity: Turn it Around/Get out of Debt•Do’s and Don’ts: Debt Strategies•Dealing with Creditors•Collection Agencies•Goal setting and Resources
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Warning Signs of Trouble
Who knows exactly how much money they owe?
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Turn it Around: Paired Activity
In pairs or groups, make a list of things that you can do to improve your financial situation………not personal stuff please!
As a large group, share answers and creative ideas
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Do’s and Don’ts: Smart Debt Strategies
• Do take steps towards improvement• Don’t feel you are alone – get help• Do focus on spending less, saving more• Don’t let others make you feel bad• Do focus on what you can do to improve• Do pay attention to your spending habits• Do keep a money journal• Do spend 10 minutes per day reviewing finances
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Do’s and Don’ts: Smart Debt Strategies
• Do contact your creditors if you will miss a payment – be proactive
• Do be honest with creditors• Don’t borrow anymore money • Do consider a consolidation loan• Do consider a second job• Do consider cashing in some investments or savings
to cover high debtMore……..
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Tips for Dealing with CreditorsOn the Phone:
• Talk to someone in charge supervisor/manager• Keep accurate record of the person you talked with,
company name, date, time, phone number, and what was said and how it was said.
• Keep in touch with the person you talk with until the problem is solved.
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Tips for Dealing with CreditorsOn the Phone:
• Avoid making promises you can’t keep. • An agreement over the phone is not a
legitimate contract. Put it in writing!• Keep your temper and be polite. Ask for your
creditor’s help, rather than telling them what to do.
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Tips for Dealing with Creditors By Mail:
Write a letter outlining any of the following: – Your reason for the letter..– Your employment status..– Your intentions on the debt..– Your reduced repayment terms..– Your request for interest relief..– Your offer on a settlement amount..– Your condition as to why you cannot make payment..– Your request for the termination of the debt (e.g. medical
reasons)– Your request for the creditor to pull the account back from
collections
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Tips for Dealing with CreditorsBy Mail:
• Never mail cash• Keep a receipt/copy of all your
cheques/money orders/letters.• Photocopy what income you are receiving
(pay stub/slip)• Create a monthly expense sheet (to be
included in the package to creditors)
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Collection Agencies- Know Your Rights
What are your rights when dealing with Collection Agencies and what do they have the right to do?
Handout/activity
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Tips for dealing with Collection Agencies
• Remember: Dealing with your debt may reduce your stress! This is good for BOTH your personal and financial health!!!
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Goal Setting
Goals should be SMART
• Specific• Measurable• Achievable• Realistic• Timeframe Attached
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Exploring Credit Bureaus, Ratings, Scores and Reports
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Credit Report / Credit Rating- Module 8
•The Credit Bureau•Credit Ratings•Credit Score •Your Credit Report – How to get it; what it means•Common errors and how to resolve them•Goal Setting and resources
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The Credit Bureau
• “Houses” and collects the information about an individual
• Collects “activity” or “transactions” and translates them into a personal score, called a credit score
• A lender may look at this score before considering extending someone credit
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The Credit Bureau
• The transactions and information collected by the Credit Bureau is recorded on a credit report
• This report also evaluates the details of your credit transactions and gives you a credit rating (R0 to R9)
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The Credit Bureau• Provides a credit profile of consumers based
on their repayment record of outstanding debts
• Monitors information provided by credit card and other lenders whether consumers repay loans regularly and on time
• Provides information to lenders to make decisions on loans
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The Credit Bureau
In Canada, there are two major credit bureaus: • Equifax Canada • TransUnion Canada
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Credit Bureau Facts• They are private, not public institutions• Errors do happen• Obtain a copy of your credit report from both credit agencies • Suggested that you check the report once a year and ensure
accuracy• Credit history is used to predict how you might manage credit
in the future • Responsible credit practices over time can improve a poor
credit history• After disputing an inaccuracy, you have the right to make a
personal statement and have it included in your credit report
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Credit Ratings
• If you were to purchase something from a store on a credit card
• not pay the charges on the card (or late)• institution will notify the credit bureau• credit bureau will record that information and
make it available to other creditors that contact the bureau.
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Credit Rating
• R0 -Too new to rate: approved but not used• R1 -Pays within 30 days of billing, or pays as agreed• R2 -Pays in more than 30 days but less than 60 or one payment past due• R3 -Pays in more than 60 days but less than 90 or two payments pas• R4 -Pays in more than 90 days but less than 120 or three or more
payments past due• R5 -Account is at least 120 days past due but is not yet rated R9• R6 -No rating exists• R7 -Paid through a consolidation order, consumer proposal or credit
counseling debt management program• R8 -Repossession• R9 -Bad debt or placed for collection or bankruptcy
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Credit Ratings
• What are some benefits of having good credit rating?
• What happens if you have poor credit rating?
Activity
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Credit Score
• What is a credit score?• What kind of information do you think is used
to calculate your score?
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Credit Score
• A calculation based on personal information from your credit report
• Scores range from 300 to 900• This score indicates how likely you are to
pay your creditors• Called FICO or Beacon Score
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Calculating your Credit Score
• Payment history (35%)• Amounts owed (30%)• Length of time in file (15%)• New credit (10%)• Type of credit (10%)
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Improve your Credit Score
• Pay all of your bills on time. • Try not to run your balances up to your
credit limit. • Avoid applying for credit unless you
really need a new account.
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Your Credit Report
Credit reports have 6 main sections:1. Personal Identification 2. Inquiries3. Public Record Information4. Third-party Collection Agency5. Trade Information 6. Consumer Statement
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Your Credit Report
Who can access my credit report?
• A company or individual may only obtain a copy of your credit report with your consent or after informing you that they will be reviewing your report.
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Your Credit Report
When you apply for a loan or credit card you are usually asked to complete and sign an application form.
An application normally includes written consent giving permission to the credit grantor to check your credit report when you first apply and throughout the life of the account.
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Common Errors
• The same account appears on your credit report more than once.
• Uninvited inquiries.• Items that should no longer be listed • Inquiries older than 2 years should be removed• Delinquencies, garnishees, repossessions, court orders,
unpaid child support stay on your credit report for 7 years.
• Bankruptcy stays on your report for 6 - 10 years depending on the credit bureau. A second bankruptcy stays on for 14 years.
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Correcting Errors
• Copy your credit report • Highlight the error• Write a letter of dispute that includes an explanation of the error• Locate and copy any additional information that can help establish
that the item is an error• Send the highlighted copy of your credit report, the dispute letter
and the copy of additional information to the credit bureau.• If you are correct, the credit bureau will remove the error. If the
creditor does not believe there is a mistake you will need to address the issue with the creditor
• BE SURE TO FOLLOW UP WITH THE CREDIT BUREAU.
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Tips to Build Good Credit Record
• Pay your bills promptly, especially credit cards• Borrow only what you need and what you can afford• Try to pay off loans on time and as quickly as possible• Get reference letters from landlords and creditors and
add them to your file.• Make sure incorrect information is removed quickly• If you are having difficulty paying a bill, contact the
creditor immediately.
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Tips to Build Good Credit Record
• If you are ill or disabled, find out if you have insurance on the loan or credit card that will make the payments when you can’t.
• Establish a steady work record• Open a chequeing account and don’t bounce cheques• Open a savings account and make regular deposits• Apply for a local store credit card and make regular monthly
payments.• Apply for a small loan using your savings account as collateral.• Get a co-signer on a loan and pay back the loan as agreed.
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Goal Setting
Goals should be SMART
• Specific• Measurable• Achievable• Realistic• Timeframe Attached
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Investing Basics
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Investing Basics – Module 9•BASIC overview•Topics:
-Stocks, Bonds, TFSA-Mutual Funds-RRSPs, RESPs
•Tips to Avoiding Investment Fraud•Goal Setting and Resources
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Investing Basics
How do you grow your money?
1.You work for your money2.Your money works for you
-examples?
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Types of Investments
• Term Deposits• GICs• Bonds• Mutual Funds• Real Estate• Stocks
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Term Deposit
• Fixed amount of money, fixed amount of time, fixed amount of interest
• Very low risk, simple, no fees• Higher interest rate than savings account but
less than GIC.• Locked in for fixed term (usually less than
year)• Penalty if cashed out early
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Term Deposit
Example:
Conditions: 1 year Term, 0.15% interestDeposit: $1,000
How much will your money earn after one year?
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Term Deposit
After one year, your money will earn you $1.50
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GIC (Guaranteed Investment Certificate)
• Your original deposit (principle) is guaranteed• Fixed amount of time, fixed amount of interest (or variable)• Most common – Between 1 – 5 years• Minimum deposit (e.g. $500 at most banks)• Very low risk, no fees, simple.• Higher interest rate than savings account or term deposit.• Locked in for fixed term• Penalty if cashed out early
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GIC (Guaranteed Investment Certificate)
Example:
Conditions: 3 year Term, 2% interestDeposit $1000
How much will your money earn after 3 years?
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GIC (Guaranteed Investment Certificate)
After 3 years, your money earned
$20.00
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Bonds
• Fixed amount of time, fixed amount of interest• Some have floating interest rates and variable terms• Buyer may purchase a bond at a discount or a premium. • Buyer may redeem the bond at face value when matured• Investing in bonds can be complicated. Many people use
an advisor to help them.
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Types of Bonds
• Government• Corporate• Canada Savings Bonds (Very Low Risk)
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Mutual Funds• A group of stocks or other investments picked
and managed by a professional investor.• Offers a wider range of investments than you
would be able to buy on your own.• Based on buying units of a fund. The price of
your units will go up or down – not guaranteed• Choose investments based on risk tolerance
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Real Estate
Ways to buy real estate1. Buy a house, live in it, and sell it later at a profit. IF the
market is good. (You can also lose money in real estate.)2. Buy income property (such as an apartment house or a
commercial building) and rent it.3. Buy land and hold it until it rises in value. (Again, some risk if
property value decreases.)
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Stocks
• Stock represents ownership of a corporation.• Company profits may be divided among shareholders in
the form of dividends. • Many investors buy and sell stocks through a stockbroker• If the market value goes up, gain can be considerable.• If market value goes down, loss can be considerable.• Selecting and managing stock often requires study and the
help of a good brokerage firm.
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Making Money
Now you know WHAT investments you can buy…
WHERE can you put your investments?
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Where can you put your Investments?
Some places where you can put your investments to grow for you:
• Non Registered• RRSP – Registered Retirement Savings Plan• RESP – Registered Education Savings Plan• TFSA – Tax Free Savings Account
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Non Registered RRSP RESP TFSA
Save for Anything Retirement, FTHB, LLLP Education only Save for Anything
Fairly Liquid Not so Liquid Not so Liquid Fairly Liquid
Short, Mid, Long Term Mid and Long Term Mid Term Short, Mid, Long Term
Tax deduction Tax deduction Tax deduction Tax deduction
Contribution limit Contribution limit Contribution limit $ government match
Contribution limit $5000
Grows tax advantage, only taxed on portions that are sold
Grows Tax Free Grows Tax Free Grows Tax Free
Taxation based on Gains only: Depends on type of investment (Interest, or Capital Gains)
Taxation: Every penny is taxed at Marginal Tax Rate
Taxation: Child is taxed on the interest earned and grant money at their MTR when they use it for Education
Taxation:No Tax
Handout
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Scenarios
• Single mother of 1 child• Makes $55,000/year• Taxed at 30% MTR• Rents but would like to own a place one day• Wants to pay less tax• Save for child’s education• Have an emergency fund
Activity
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Scenarios• 19 year old student• Makes under $20,000/year• Taxed at 20% MTR• Wants to save for a car one day• Can afford to save $200/m
Activity
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Scenarios
• Husband & Wife – no children• Make $200,000 combined• Taxed at 40% MTR• Have their own home• Don’t have much saved for retirement• Would like to pay less tax• Have an emergency fund
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Canada Learning BondEligibility:
must be receiving the National Child Benefit Supplement (usually for families with a net income less than $38,882)
Child born in 2004 or after
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Canada Learning Bond
Here’s how it works…• You open an RESP• Government deposits $500 into the RESP• And $100 each year that family remains eligible
until the child is 15 years old
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Canada Education Savings Grant
Every plan gets a 20% match…But depending on the net family income:
40% match if income is $38,832 or less on the first $500 saved each year
30% match if income is 38,832 - $77,664 on the first $500 saved each year.
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Opening an RESPAny bank or credit unionGroup plan dealers
Before you open an RESP you will need to:Have a birth certificate or PR card for your childGet a SIN # for your childHave your ID and SIN# for yourselfKnow what you need/want in an RESP
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Educate yourself• Learn the basics of investing for yourself • Have a clear goal what you want your money
to do for you• Understand and manage your risks• The more informed you are the better
decisions you make
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Investment Fraud• Illegal pyramids, insider trading, and unlicensed investment
brokers• High-risk “penny” stocks and fraudulent opportunities.• Internet services, 900-numbers, and high-tech investments
promising high profits and minimal risk• Opportunities to invest in movie deals and other
entertainment ventures with promises of guaranteed profits and failure to disclose risk
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Tips to Avoiding Investment Fraud
• Be informed – investigate and research!• Talk with others who have made similar
investments• Obtain information from provincial and
federal regulatory agencies• Never buy over the phone• Avoid “to good to be true” deals!
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Warning Signs
• You hear about it from a stranger• You can’t check that the information is right or they
won’t give you the info in writing• A promise that you can make lots of money fast with
no risk• It’s a “hot tip” that you are not supposed to tell
anybody about• You feel pressured
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Goal Setting
Set goals to apply what you learned today.Remember, goals should be SMART• Specific• Measurable• Achievable• Realistic• Timeframe Attached
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Questions?
CONTACT INFO:
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Thank You!
