If you have more questions about the different types of investment boxes, April can offer greater detail. them as the different kinds of boxes they can invest in.
“So, you have the RRSP box, your tax-free savings box and then your non-registered boxes that are not in one of those plans.
The money that goes into an RRSP box or a tax-free box, can be invested in multiple ways. The advantage to an RRSP is that every dollar you put into it is like a dollar you haven’t technically ‘made’ and you get a tax rebate at the end of the tax year on the amount that you’ve contributed. So, you get the tax break upfront with the RRSP and that money is meant for long term – meant for retirement, meant for when you don’t have your regular income coming in and you can start to withdraw from that. So, think of that as the long-term saving.”
“The Tax-Free Saving is more for large amounts that you want to invest, that you could access sooner that retirement or, could also be saved for extra income at retirement or extra savings for retirement. Every dollar that you put into that, which you earn interest on, you don’t pay tax on – even when you take it out.”
A growth tax shelter, is the same as the RRSP, but when you need access to your money in your tax-free savings account (TFSA), you don’t have any tax penalties.”
With interest rates so low, is it worth investing?
April says the short answer is yes, “In the boxes, you can invest in multiple ways – for example, there’s GIC is a guaranteed investment (Guaranteed Investment Certificate) – it has a lower interest but you know what you’re going to get at the end of the term. Those can be invested in both the RRSP and the Tax-free savings, you can invest in mutual funds that give you potential higher returns, if you’re in it for the long-haul, and that can also be in an RRSP or Tax-free savings. So, the myth of an RRSP or a tax-free savings account is low interest is not really accurate. It’s what you’re investing inside those boxes.”
What about young people who are just leaving college or university, who may think they don’t have to worry about investing yet?
April dispels that myth, “Starting early means you have more time for your money to compound and grow. So, the ‘rule of 72’ is the amount of interest divided by 72 is how many years it takes your money to double, so the longer time frame you have to invest, the higher your money will grow. The longer time you have in any investment, whether it be GIC’s or the market such as mutual funds, the longer your money ha to grow.”
“Start early – that’s the big one. I love helping young get started, they’re my favourite cause they’re moldable, they want to learn, they listen to you. I often say, just get into the habit of putting something away – $20 a month, $20 a pay-cheque – just get that habit and as you get raises over the years, you can increase that amount, but you can start seeing your money start to grow and you’re paying yourself first. Money is going into investment, to pay you – it’s your money.”
When people are looking for information about investing – how does that work?
“Anyone who comes in, they are more than welcome to sit down and have a conversation and we show them different calculators, show them physically how their money can grow, we can tech people and educate and we don’t charge anything for that service. We are a Credit Union, we’re locally owned and operated, we help our communities that we live in, we pay back to our communities, so we are here to help the people who live in those communities.”
There is a specific product they are featuring over the first few months before tax time.
“We are featuring this new investment product from January to March 6. It’s really exciting because it give people options and some flexibility and we’re calling it “Flex Invest” and it is a five year term product that you invest your money in and it’s still completely guaranteed, so all the money you put in is 100 per cent safe and guaranteed and he interest floats with prime. So prime, minus one-and-a-half per cent is what the interest rate will be. So, if interest rates go up, your investment rate will go up and if the rate goes down, it will follow that as well. But, keep in mind that the investment that you put in is always going to be guaranteed, so you won’t lose any of the principle or interest that you earned.”
It’s a five-year term, but can the money be accessed before the term ends, in the event of an emergency?
“Yes, this one is really unique. We’ve never had an option like this before so on the anniversary date of when you put the money in, you’re allowed to redeem 20 per cent of the balance that you put into it. You’re also allowed to contribute more to it on the anniversary date and that gives it a nice flexibility to if you can’t always put in the amount that you want to start with, every year, you can add to it and help it to grow.”
“Another cool thing about the Flex Invest is that it is eligible for all the boxes, so it’s eligible for the Tax-Free savings, the RRSP and for non-registered money, and the non-registered just means that it’s not in a sheltered growing investment, so you do pay the tax on the interest that you earn.”
One other thing to note, is that with the RRSP’s and the Tax-Free savings, you do have maximum contribution limits, so we always advise people to check their notice of assessment or call CRA (Canada Revenue Agency) to make sure they know how much they are allowed to put into the investment.”
“First Choice Savings is locally owned and operated in Southern Alberta – with locations in Taber, Lethbridge, Cardston and Magrath – and we really help our communities by giving back to school functions, to rodeos, sports teams, or individuals. When you become a member of First Choice Savings, you actually become a member-owner and that gives you a voice in the say of what we do in our communities. We really appreciate our members, value our members and help them reach their financial goals.”
For more information or to set up an investment discussion, contact First Choice Savings
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