Presentation Transcript

1. Finance

   Saving and Investing
2. Learning Goals Students will demonstrate an understanding of effective investment practices
3. Saving and Investing Consumers can use any money left over from purchasing goods and services toward savings or investing. Saving means putting money aside for future use. Investing is using savings to earn extra income. For most consumers, it is a good idea to combine both savings and investing in their financial plan.
4. Why People Save The Need for a Savings Plan A savings plan ensures that a certain amount of money is put aside on a regular basis to reach a financial goal. Why People Save People save for many reasons including emergency needs, short- and long-term goals, and security and future needs. Benefits of Savings Plans - Plans offered by financial institutions can offer interest, safety, and insure against loss.
5. Earnings and Yield When money is deposited into an account at a financial institution, it is being lent to the institution so that it can also be lent to other borrowers. Interest is 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)
6. Safety and Liquidity Safety Established in 1967, the Canadian Deposit Insurance Corporation (CDIC), an agency of the federal government, protects depositor’s funds to a maximum of $100 000. Liquidity Liquidity is the ability to convert an asset or investment into cash quickly and easily. There is a wide range of savings plans available to individuals from different institutions.
7. Term Deposits and Guaranteed Investment Certificates Term deposits and guaranteed investment certificates (GICs) are savings plans in which a fixed sum of money is deposited over a specific length to time. Registered Retirement Savings Plans In 1957, the federal government introduced registered retirement savings plans (RRSPs) to encourage people to save for retirement. Registered Education Savings Plans Registered education savings plan (RESP) is a long term savings plan to help finance a child’s education. Income earned is tax-free until the child attends an approved post- secondary school full time. The amount is limited to $42 000 (new legislation $50 000). The Canadian Education Savings Grant (CESG) is up to $400 per child per year.
8. Investments Such as government or corporate bonds, stocks or mutual funds, real estate, and collectibles, have different levels of risk. Lower yields are associated with “safer” investments. Higher yields are associated with riskier investments. When someone diversifies their investment, they spread their investments across several types.1. Canada Savings Bond - A Canada Savings Bond (CSB) is a loan made by an individual to the government of Canada. On the maturity date, the government will repay the principal plus interest. 2. Corporate Bonds - Businesses sometimes need money to increase production, expand operations, or introduce new products. Businesses sell securities— corporate bonds and shares of stock—to raise the necessary funds. A bond is a promise to repay borrowed money on a certain future date along with interest.
9. Investments 3. Stocks - When an individual buys stocks, they become part owner or a shareholder in the company. Shareholders share the risks and rewards of the company. A bull market occurs when the demand and price for most stocks is high. When demand and price for most stocks is low, it is a bear market. Common Stock - Common stock represents general ownership in a corporation, carries voting privileges, and includes a right to share in its profits. However, there are no fixed dividend rates. Common stock is always liquid—it can be bought or sold at any time on the open market. Preferred Stock -preferred stock has advantages over common stock due to the payment of fixed rate dividends. Shareholders have no voting privileges, and stock prices tend to be more stable. This type of stock is also liquid. Blue chip companies such as Weston and Imperial Oil are characterized by a long record of regular dividend payments, stable growth, and active trading.
10. Investments 4. Mutual Funds - Mutual funds are pools of money from many investors that are set up and managed by an investment company to buy and sell securities from other corporations. 5. Real Estate - Real estate is land and anything attached to it. Besides buying a home as a form of investment in real estate, some people buy income property. 6. Collectibles - Collectibles are items of personal interest to a collector. A collectible may increase in value over time due to the scarcity of the item or the demand in the market.
11. To Do: 1. Stock Market Game 2. Answer the following questions: What will you need to save for in the next 10 years? How will you go about meeting those savings goals? Be specific. What type of investments would you feel comfortable making when you are 25? 45? 65? Does your answer change as you get older? Why? Be detailed. Now that you know about different investment options do it change your ideas towards your own savings? Explain why or why not.