FINANCIAL LITERACY

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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 1,000,000
• What would you do with it?

Handout/Activity
10
Money

• If I give you 10,000
• What 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 Low
• 10 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 Setting

• Set 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 dont 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 1Single 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 months 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
  monthit 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 4.33
• Every Two Weeks Multiply by 26 Divide by 12
• Twice a Month Multiply by 2
• Four Times a Year Divide by 3
• Twice a Year Divide by 6
• Once a Year Divide by 12

Handout/Activity
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Finding Money Activity!!Write a list of things
you buy often

• For 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 youll 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 1.06 106
• Year 2 ? 106 x 1.06 112.36
• Year 3 ? 112.36 x 1.06 119.10
• Year 4 ? 119.10 x 1.06 126.25
• Year 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

• Whats the difference between a need and a
  want?

Discussion/activity
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Needs vs. Wants

• A 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
• Childrens Education
• Less Stress

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Saving is a Habit

• Start small
• Dont dip into savings
• Try forced savings technique

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Saving Early

• As 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 Early
Mr. Start Early Mr. Start Early Mr. Start Early Mr. Wait Longer Mr. Wait Longer 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 Total Contribution Total Contribution Total Contribution Total Contribution
25,200 25,200 25,200 61,200 61,200 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 1.28 256
• Year 2 ? 256 x 1.28 327.68
• Year 3 ? 327.68 x 1.28 419.43
• Year 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 monthAND
• Short Term 1-5 years
• Mid Term 5-10 years
• Long Term 10-20 years

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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

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
• Wont 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.100
• Electronic Filing Fee... 40
• Refund Loan Charge.. 125
• Padded Loan Fees.. 35
• Cheque-Cashing Fee up to 200
• Total500

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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
• Dont 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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Opening a Bank Account

• To open a bank account
• Dont need to have a job
• Open an account at a bank, a trust company, or a
  credit union.

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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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Internet Banking

• What are the PROS and CONS of internet banking?

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Sending Money Abroad

• How do you send money abroad?

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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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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!
105
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.

107
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 loanconsider

• 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
• Dont 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
116
Tips - Credit Card Dos and Donts

• Shop around
• Look at various sources, such as banks, credit
  unions, retailers
• Read the contract carefully understand the terms
  and the fine print
• Dont rush into signing anything
• Once signed, get a copy of the contract and keep
  for your records

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Tips - Credit Card Dos and Donts

• 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
• Dont 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
• Dos and Donts 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
  situationnot personal stuff please!
• As a large group, share answers and creative ideas

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Dos and Donts Smart Debt Strategies

• Do take steps towards improvement
• Dont feel you are alone get help
• Do focus on spending less, saving more
• Dont 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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Dos and Donts Smart Debt Strategies

• Do contact your creditors if you will miss a
  payment be proactive
• Do be honest with creditors
• Dont borrow anymore money
• Do consider a consolidation loan
• Do consider a second job
• Do consider cashing in some investments or
  savings to cover high debt
• More..

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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 cant keep.
• An agreement over the phone is not a legitimate
  contract. Put it in writing!
• Keep your temper and be polite. Ask for your
  creditors 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. Inquiries
• 3. Public Record Information
• 4. Third-party Collection Agency
• 5. Trade Information
• 6. Consumer Statement

148
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.

153
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 cant.
• Establish a steady work record
• Open a chequeing account and dont 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.

154
Goal Setting

• Goals should be SMART
• Specific
• Measurable
• Achievable
• Realistic
• Timeframe Attached

155
Investing Basics

156
Investing Basics Module 9

• BASIC overview
• Topics
• -Stocks, Bonds, TFSA
• -Mutual Funds
• -RRSPs, RESPs
• Tips to Avoiding Investment Fraud
• Goal Setting and Resources

157
Investing Basics

• How do you grow your money?
• You work for your money
• Your money works for you
• -examples?

Activity
158
Types of Investments

• Term Deposits
• GICs
• Bonds
• Mutual Funds
• Real Estate
• Stocks

159
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

160
Term Deposit

• Example
• Conditions 1 year Term, 0.15 interest
• Deposit 1,000
• How much will your money earn after one year?

Activity
161
Term Deposit

• After one year, your money will earn you 1.50

162
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

163
GIC (Guaranteed Investment Certificate)

• Example
• Conditions 3 year Term, 2 interest
• Deposit 1000
• How much will your money earn after 3 years?

Activity
164
GIC (Guaranteed Investment Certificate)

• After 3 years, your money earned
• 20.00

165
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.

166
Types of Bonds

• Government
• Corporate
• Canada Savings Bonds (Very Low Risk)

167
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

168
Real Estate

• Ways to buy real estate
• 1. 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.)

169
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.

170
Making Money

• Now you know WHAT investments you can buy
• WHERE can you put your investments?

171
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

172
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
173
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 childs education
• Have an emergency fund

Activity
174
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
175
Scenarios

• Husband Wife no children
• Make 200,000 combined
• Taxed at 40 MTR
• Have their own home
• Dont have much saved for retirement
• Would like to pay less tax
• Have an emergency fund

Activity
176
Canada Learning Bond

• Eligibility
• 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

177
Canada Learning Bond

• Heres 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

178
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 RESP

• Any bank or credit union
• Group plan dealers
• Before you open an RESP you will need to
• Have a birth certificate or PR card for your
  child
• Get a SIN for your child
• Have your ID and SIN for yourself
• Know what you need/want in an RESP

180
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

181
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

182
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!

183
Warning Signs

• You hear about it from a stranger
• You cant check that the information is right or
  they wont give you the info in writing
• A promise that you can make lots of money fast
  with no risk
• Its a hot tip that you are not supposed to
  tell anybody about
• You feel pressured

184
Goal Setting

• Set goals to apply what you learned today.
• Remember, goals should be SMART
• Specific
• Measurable
• Achievable
• Realistic
• Timeframe Attached

185
Questions?

• CONTACT INFO

186
Thank You!