To keep its value, your money needs to grow enough to match inflation. Saving accounts won't beat inflation but they work for your rainy-day fund. Investing can beat inflation in the long run, but comes with some risk in the short term - that your investments can lose some of their value because of economic developments or events that affect the entire market. Wise investors will save a portion of their paycheques for the short term and invest a portion for the long term.
Inflation in Canada is measured every month by Statistics Canada.
The latest reading (for July 2022) is 7.6% - compared to previous July, prices during the month rose 6.7%. This means that if an item cost $100 last July, today it costs $107.60. In the summer 2020, inflation fell to 0.1% because of the pandemic. Before COVID-19, inflation had been running at around 2%. Currently, inflation is the highest in 40 years. Between 1960 and 2021, average inflation was 3.4% per year.
Source: https://www.statcan.gc.ca/eng/start. Consumer Price Index data.
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'Saving' is putting some of your earnings aside for later use.
'Investing' is putting your savings to work - so they grow over time.
Investing is not like gambling. When you invest, you help the economy grow. Companies create new jobs and innovate. People are confident and spend money. In turn, both salaries and prices rise - it's called inflation.
Once you're comfortable with your savings account and GICs, consider opening a personal investment account and following a ready-made strategy. You can make more money than with GICs but you'll have to take on some investment risk.
If you're an avid investor and are eager to learn, consider doing it yourself. It's the harder when you're starting out but over time will cost you the least in fees. Unlike ready-made, you're doing everything yourself, from start to finish.
Compare ready-made and DIY investing based on cost, effort, and size. How to decide?
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Check out our investing cheat sheet.
GICs (guaranteed investment certificates) are similar to savings accounts. You get paid interest regularly, but you can't withdraw your money whenever you want. Instead, your GIC ‘matures’ on a certain date - that's when you get your money back.
GICs pay higher interest than savings accounts.
You can use this money to pay for unexpected expenses / events (emergencies, repairs, should you lose your job, etc).
Use your savings account for the rainy-day money:
Everybody needs a savings account. If you don't have one, get started.
Jeff’s heart is pounding as he bolts down the busy sidewalk – the secret service is after him...
You're saving for big-ticket items (like tuition, car, gap year, wedding, house, retirement) and won't need this money soon.
Since you won't need this money soon, you should invest it and earn more investment income (profit) over time than from a savings account. But you need to:
1. Be prepared to commit to an investment for a few years.
2. Arm yourself for the possibility that your investments may lose some value in the short term.
They're multiple choice - always choose the most appropriate answer.
Click on the diagram to find out how investment accounts work.
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Each of these accounts can be opened as a registered account or as a taxable account. You must be the age of majority to open your own saving/investment accounts as registered accounts.
Click on the icon to join Jeff and sprint through investing. It should take you about 7 minutes.
On your own, you can only open a savings account.
You can't buy a GIC or invest until you're the age of majority in your province (18/19). Your parents / guardians may invest for you with
Each phrase can have up to five words - always choose the most appropriate answer.