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Banking 101: Long-term investments

There are several financial choices to consider when planning for your future. Read on for some information on banking options for long-term money management and growth.

Couple meeting with financial advisor

You work hard for your money, but does your money work for you? Taking the time to create a long-term investment portfolio can go a long way to securing your financial future. A solid savings or investment plan can help you reach whatever financial goals you have in mind, whether it’s to purchase a home, pay for your kid’s education or retire in comfort. While almost every banking institution will have its own interest rates, specialized plans and even such promotional incentives as travel points, several industry standards can help you optimize your finances. Here is a brief lowdown on some of the banking options you can utilize to help you reach your long-term goals.

GICs — guaranteed investment certificates

  • A safe, low-risk investment option, as it offers a guaranteed return of the invested (or principal) amount.
  • May have either fixed or variable interest rates that will be above those usually offered for a savings account.
  • Depending on the financial institution, there may be several options to choose from, with specific terms such as a minimum investment and limited access to the funds.

TFSA — tax-free savings account

  • Tax-free savings accounts are available to everyone, as no minimum investment is required.
  • Contributions to the plan of up to $5,000 per year are allowed, and unused portions can be carried forward to future years.
  • Income earned from investment returns in the account are tax-free. Eligible investments include mutual funds, GICs and bonds.

Mutual funds

  • Mutual funds are a collection of stocks and bonds that are held in trust and professionally managed.
  • Can be a convenient way to hold a diversified and balanced investment portfolio.
  • Are easy to liquidate if the money is required.

RRSP — registered retirement savings plan

  • A personal tax-deferred savings plan that allows your money to grow tax-free until it’s withdrawn.
  • Contributions are tax deductible and will help lower a yearly income tax bill.
  • Will generally contain several investments, although the money can be easily withdrawn if the need arises.

RESP — registered education savings plan

  • A savings plan to be used to pay for your child’s post-secondary education.
  • Is a tax-deferred plan until withdrawal. As the funds are withdrawn to pay for the education, they become taxable to the beneficiary, which is the student.
  • The lifetime contribution limit per beneficiary is $50,000.

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