Build Your Savings For The Future
MAKE YOUR MONEY WORK HARDER FOR YOU WITH SAVVY SAVINGS AND INVESTMENTS
Whatever you’re saving for - the down payment on your first home, capital to start up a business, your children’s education or your retirement - you need to find the best way to build your savings for the future.
A typical savings account isn’t going to provide you with the interest you need to really grow your money. There is a wide range of options available to you that will suit your plans and investment style. There are low-risk options that guarantee both the money you are investing and the interest. Higher risk options could bring you higher returns, growing your money much faster - but there are no guarantees on your principal or rate of return. If you are able to lock your money in for longer periods, the returns are considerably higher.
TAX-SHELTERED SAVINGS OPTIONS
There are several, government registered, tax-sheltered options that can help you invest for your future while saving tax now.
RETIREMENT SAVINGS PLANS (RSPS)
- The big advantage of RSPs is that payments are tax-deductible and income earned is tax-sheltered.
You can invest up to 18% of your earned income or that year’s maximum amount, whichever is the smallest (for 2019 the maximum is $26,500).
- Taxation occurs when the money is withdrawn which is usually at retirement and typically results in a lower tax bracket. The downside is that you are taxed when you withdraw the money. However, by that time you will probably be in a lower tax bracket.
- You can hold all manner of investments in RSPs, like stocks, shares, bonds, mutual funds, ETFs and GICs (learn more about these options below).
TAX-FREE SAVINGS ACCOUNTS (TFSAS)
- Any interest earned on money you place in a TFSA is tax-exempt.
- The limit on how much you can contribute changes - for 2019 it is $6,000. If you don’t contribute one year, the amount you can pay the next year grows.
- TFSAs aren’t tax-deductible but you won’t be charged tax on any withdrawals you make, ever. They can hold the same types of investments as RSPs, so investment income like dividends and capital gains are tax-exempt. If you withdraw from a TFSA your contribution room isn’t lost, it gets added onto to the following year.
REGISTERED EDUCATION SAVINGS PLANS (RESPS)
- While saving for your children’s education, no tax is paid on investment income or growth so long as the money stays in the RESP. Withdrawals are taxed when the student withdraws the money, which, with a low tax bracket, usually means little to no tax being paid.
- The Canada Education Savings Grant matches 20% of your annual contributions, up to a maximum of $7,200. Other incentives are available to low-income families.
MATCHING YOUR SAVINGS PLAN WITH THE KIND OF INVESTOR YOU ARE
The level of risk you’re comfortable with, the length of time you can lock in money and whether you want a hands-on or hands-off approach to investing all influence the kind of investments that are best for you. Whatever kind of investor you are, there’s an option, or combination of options, that’s right for you:
TERM DEPOSITS AND GUARANTEED INVESTMENT CERTIFICATES (GICS)
These investments are ideal if you’re risk-averse, with principal and interest guaranteed 100%. With Mountain View Financial’s term deposits, you invest for a fixed period of time and get a guaranteed return. Your best return is with non-redeemable deposits, for example, our five-year term deposit with a guaranteed annual interest of 2.5%. However, if you withdraw your money before the term is up, you pay a penalty.
BONDS AND SAVINGS BONDS
Government bonds offer a safe investment but returns can be very low. Company bonds offer better returns but aren’t as safe - if the company goes under, you could lose the money you invested.
MUTUAL FUNDS AND EXCHANGE-TRADED FUNDS (ETFS)
Mutual funds and ETFs allow you to buy groups of stocks, bonds and securities that are managed by financial professionals. They offer a more diversified portfolio, thus reducing risk and can bring high returns.
FINAL WORD - "THE KEY IS TO START EARLY"
The earlier you start saving, the more money you will have when you need it. Our experienced investment team can help you to choose the right investment products for your situation and goals.