THE SECRET TO GETTING RICH!!

THE SECRET OF BECOMING RICH!

Save at least 10% of your income and never spend it, but INVEST it.

Never spend the principal, but accumulate enough wealth to live off the interest/investment income.

Fun Fact! $100 a month saved for 45 years at 14% compound interest is $1,228,800! Anyone can be a millionaire!!!

WOULD YOU RATHER...

Would you rather I gave you one million dollars today or a penny today and then doubled it every day for 30 days?

$0.01 doubled every day for 30 days =

$10,733,418.00

INVESTMENT DEFINITIONS

Compound Interest: earning interest on the previous interest. The interest must be left in the investment.

Risk: the chance of losing invested money. Rate of Return: determined by the interest

rate and the amount of the investment. Liquidity: how easily the investment can be

turned into cash. Term: the time after which the interest is paid

or the investment no longer pays interest.

INVESTING FINANCIAL RESOURCESAKA MONEY

CHEQUING ACCOUNTS

Bank accounts from which cheques can be written. The Canadian Deposit Insurance Corporation (CDIC) covers up to $60,000.

Risk: none Return: almost none Liquidity: very high Term: none

SAVINGS ACCOUNTS

Bank accounts used for saving money. The CDIC covers up to $60,000.

Risk: none Return: very low Liquidity: high Term: daily or monthly interest

TERM DEPOSITS, GUARANTEED INVESTMENT CERTIFICATES (GIC’S)

Money that is deposited for a set length of time: ie. 1, 2, 3, 4, or 5 years. There is a financial penalty if the money is withdrawn before the agreed upon period.

Risk: low Return: low to medium, dependent upon

length of term Liquidity: low Term: 1, 2, 3, 4, or 5 years

CANADA SAVINGS BONDS

Bonds (lending money) issued by the federal government at an established interest rate. There are two kinds: one that may be liquidated and on that may not.

Risk: very low Return: low to medium Liquidity: low or high, depending on type Term: 9 years

MORTGAGES

Lending people money to purchase buildings and/or property. The buildings and/or property are established as collateral.

Risk: low to medium Return: medium Liquidity: low (buildings or land must be sold) Term: up to 35 years

REGISTERED RETIREMENT SAVINGS PLAN (RRSP)

Any investments that are at least 80% Canadian are registered with the federal government as an RRSP. In addition to the tax free interest paid by the investment, the government provides a tax credit on the principle equal to the investor’s tax bracket.

Risk: low to high (depending on the investment)

Return: high (because of the tax credit) Liquidity: low (taxes are paid when

withdrawn) Term: depends on investment

STOCK MARKET

Bonds: lending a company money for an agreed upon interest rate.

Stocks: owning a part of a company. Shares in the company increase in value with the value of the company and the demand for shares.

Risk: medium to high Return: loss of investment to super high Liquidity: low to medium Term: none

REAL ESTATE

Purchasing buildings or property to rent.

Risk: medium to high Return: medium to high Liquidity: very low Term: none

GOLD, SILVER & COLLECTIBLES

Purchasing valuable commodities that increase in value over time.

Risk: medium to high Return: low to medium Liquidity: low to medium Term: none

MUTUAL FUNDS

Money pooled by many investors in a mutual fund company of professional financial experts who research the stock and bond markets to invest in a particular sector. There are bond funds (low risk), balanced funds (medium risk) and equity funds (high risk).

Risk: medium to high Return: low to high Liquidity: medium (takes about a week to

liquidate) Term: three year minimum is recommended

PYRAMID OF INVESTMENT RISK

If you had $10,000 to invest, which of the options would you choose, or would you divide the money into several investments?

Approx. $2000 in low risk, $4000 in medium risk, and $4000 in high risk is a good choice for a young person. The older you get, the less risk you should take.

It would be imprudent to put all $10,000 into one investment, especially a high risk one.