Savings and Banking
Life Transitions 30
Objectives:
 Explore reasons for saving and basic forms of savings available
 Calculate interest to compare saving outcomes
 Realistic savings targets
 Bank statements and bank services
 Identify theft, secure record keeping, and establish a personal
recordkeeping system
The City
 Story
 What is Sienna saving for?
 How did she manage to reach her savings target?
 How did Sienna’s savings grow?
 What did the characters need to know at the start of the story?
What did they learn at the end?
 What do you want to know about saving money?
 Discussion:
 Reasons for saving, personal goals, family goals …
 Main reasons why people include savings in their budget.
Why Save Money?
To buy a big item or pay for a big bill
that’s coming
To have emergency funds
To build funds to invest
Options:
Where do you put your money to save?
Putting Your Money To Work
When you save, your money can earn interest
A savings account is a simple form of investment
Lending money to the bank, safe, low risk, low interest,
term deposit – bank keeps it longer, GIC – longer =
higher interest
Interest depends on time and risk
Current interest rates?
Funny Money: Building Long Term Wealth
 https://www.youtube.com/watch?v=23zghpS9034
Choices
Save or spend?
If I save it, what’s my best savings choice?
When do I need it? Soon, or after a time?
Can I put this money to work for me until them?
Ways to Save
1. Reduce spending on
“wants”
Coffee, food, luxury items
Pop $2.00 (3 a week $288)
2. Pay yourself first
Save the first 10% of income
after deductions
3. Put your savings to work
4. More
 Mutual Funds
 Stocks
 Bonds
Investments – earn money in the form of interest
Saving Account: a
deposit account that’s
secure but accessible and
pays a small amount of
interest
Investments
 Guaranteed Investment
Certificate (GIC)
 a deposit for a fixed period of
time that pays a set (or sometimes
variable) interest rate. Term
deposits are very similar
http://solvingthemoneypuzzle.com/2013/04/08/should-my-next-investment-bea-market-growth-gic/
Canada Savings Bond
A loan to the Government
of Canada at a guaranteed
interest rate (that may
change from year to year)
Risk and Return
 Money earns income at
different rates
 The one key factor in
determining whether
money earns a high income
or a low income is the
amount of risk.
 High risk vs Low risk
 Expected Return - is what
you hope for. You could
lose, to.
Savings Add Up
 Simple Interest
 Is paid only on the initial deposit
 Compound Interest
 Is paid on the initial deposit and on any interest that has been earned, so your money
grows more rapidly
 Interest compounding means that starting long-term savings while young creates
a big advantage.
 Financial institutions pay different rates of interest so it’s a good idea to compare
the rates that different financial institution will pay to get the most interest on your
savings.
Simple Interest
 $1000 at 5% simple interest
earns $50 every year.
Compound Interest
 $1000 at 5% compound interest
earns $50 in the first year
 $50 in the second year (total
$1100)
 $52.50 in the second year
($1102.50)
 $50 in the third year ($1150)
 $55.13 in the third year ($1157.63)
 $50 in the fourth year ($1200)
 $57.88 in the fourth year ($1215.51)
Calculators
 Simple:
 http://www.moneychimp.com/features/simple_interest_calculator.htm
 Compound:
 http://www.moneychimp.com/calculator/compound_interest_calculator.htm
 http://www.bankofcanada.ca/rates/related/investment-calculator/
 Journal Assignment:
 Pick a realistic amount of money you could invest as a principal amount. Then pick an amount of
money you would be willing to invest on a monthly basis. How long would you like to keep this
investment going? Do you want simple or compound? Lets go with 4% interest rate.
 Journal – print out
Spender vs Saver
 https://www.youtube.com/watch?v=3pLp-NZfbso
Practice – use an online calculator
Joe Saver
 Knows the value of compound interest.
 19 years old – invests $3000 each year, at
8% for 9 years.
 He manages this for nine years, then at
age 28 he starts a family and spends all of
his income supporting his family.
 He puts no additional money in for the
next 37 years.
 How much does he have at 65?
Jim Spender
 Likes to travel and party, so he spends all
of his money for a while.
 Turns 28 and decides he had better start
to save. He puts $3000 a year into the
same long-term investment earning %
annual compound interest.
 He continues to save $3000 a year for the
next 37 years until he retires at ag65, and
then checks to see what his savings
amount to?
Rule of 72
 The Rule of 72 is an easy way to calculate approximately how long
it takes for your savings to double at a compound interest rate.
 Divide 72 by the interest rate to find out the number of years it will take to
double the amount saved.
 Divide 72 by the number of years of saving to find out the interest rate needed
to double the amount saved.
 Ex: 72/5% = 14.4 years to double
 Ex: 72/10 – 7.2% interest needed to double
Banking Services
Life Transitions
Why should we pay attention?
1. Opportunity Cost
2. Errors
3. Make the most of our money
4. Plan for the future
5. Financial Plan
6. Build our credit rating
Video: Banking Tips
Banking Basics
 Financial Institution
 Is an organization that provides banking or other financial services for
customers.
 Banking
 Refers to the deposit, loan and similar services that these financial institutions
offer.
 There are many types of financial institutions
 Banks, credit unions, caisses populaires and trust companies. Banks and trust
companies are owned by investors, credit unions and caisees populaires are
owned by their members.
Tap and Go Concerns
 http://www.youtube.com/watch?v=txOt6gftBe4
How to open an account?
 Two pieces of ID. Some chequing accounts have a monthly fee of $4 or less.
 Rights:
 When you open a deposit account, you have a right to see the complete account
agreement, any interest paid and how it is calculated; any charges on the account,
hold policy on cheques (how long they will hold it before they give you access), and
what to do if you have a complaint.
 Any changes to account must be given in writing.
 Right to cash a cheque issued form the Govt of Canada for free at any bank.
 Responsibilities:
 Read and understand the terms of your account agreement
 Check your account statement regularly and report anything
 Keep your accounts documents, passwords and PINS secure
Ways of doing banking?
Brainstorm
 Deposit
your money to keep it safe until you need it.
Deposit
Services
 Deposits in most financial institutions are guaranteed up to a certain
amount
 Deposit Insurance - Canadian Banks are one of the best for regulations, in
the bank fails, and unable to pay, your money to a certain amount is
insured – double check
 Interest
 Savings – higher rates, may be charged for withdraws
 Chequing – low or no interest at all
 http://www.tdcanadatrust.com/document/PDF/accounts/tdct-accountsint-calc.pdf
 Deposit a cheque – will hold onto the money for a few days, then
transfer money and ensure it is there.
 Fees associated with accounts.
When selecting a chequing account,
consider…
 Financial institutions in Canada offer a wide variety of deposit accounts. To match your
needs to the services they offer, they need to know a bit about you and how you expect
to use a banking account. For example, they need to know:
 Required balance; monthly fees, interest earned, cost of printing cheques, and charges
for other fees and services
 if you are a member of a special group, such as students, youth or seniors
Accounts
(they may charge lower fees for some groups)
 the minimum balance you will have in the account each month (they
may not charge regular fees if you keep a minimum amount in the
account)
 the number of transactions you expect to do in a month (sometimes it's
cheaper to pay for each transaction, sometimes it's better to pay a flat
monthly fee)
 if you need any special services on a regular basis, such as:
 certified cheques
 money orders and bank drafts
 stop payments
 travellers' cheques
 personalized cheques
 overdraft protection
 cheque returns
 safety deposit box
 access to bank machines that are not owned by your financial institution
 email money transfers.
Chequing and Savings
Interest
Financial institutions usually
calculate the amount of
interest to pay each month.
Some calculate the amount
daily and pay the amount into
your account at the end of the
month. Some calculate it on
the lowest amount you had in
the account over the month. If
they calculate it daily, you'll
save a little faster.
Interest on Accounts – TD Canada Trust
Managing your Chequing Account
 Cheques – What you need to
know!
 How to write them.
 Even with online and card
payments – there is still 1 billion
cheques that get processed a
year.
 Cheque – agreement b/w two
people
 NSF –non-sufficient funds
 Post-dated cheques (cashed
early/what is it)
• Cheque cashed by a different
individual (counter-signed
cheques); endorsed cheques
• Stop Payment
• Fraudulent cheques
• Bank Reconciliation
Source: http://www.cba.ca/en/consumer-information/40-banking-basics/584cheques-what-you-need-to-know
Sample Cheque
Cheque Book Register
Bank Statement
•Online or monthly statement that
is mailed to you.
•TD
•Infinity Account $14.95
•Overdraft Fee $4
•Statement Fee $2
•Cheques
•$39.95 for 100 Cheques (TD)
•$20 for 100 at ASAP Cheques
Bank Reconciliation
 The difference between the two records
on a given date may arise because of
the following;
 Cheques drawn but not yet presented
to the bank
 Cheques received but not yet
deposited in the bank
 Interest credited and not recorded in
the organization's books
 Bank charges debited but not
recorded in the organization's books.
Assignments:
 Banking Services
Complete the bank services sheet
Complete the chequing account sheet
 Chequing Account
Keeping a running balance
Reading a bank statement
Reconciling an account