Q – I am a 35 year old school bus driver and have very little savings in the bank. I would like to see my money grow, but I don’t like to take risks with what I already have. Can you recommend an investment that would be suitable? – Sue S., Woodstock, Ontario
A – A recent survey of the market showed that the highest rate paid in a standard, plain-vanilla deposit account at your local financial institution was 2.1%, while the lowest was, believe it or not, 0.01%! At a rate of 2.1%, starting with, say, $1,000 and adding $200 per month for 30 years, you’ll wind up with a total of a little over $100,000. And only about $29,000 of that would be the interest you’ve earned. Factor in inflation, currently running about 2%, about 30% tax on the interest income, and the monthly fee the bank charges you just for keeping your money on deposit, and you’re actually losing money – plenty of it – on every dollar you’re allegedly “saving.”
This is no joke! The era of low interest rates makes it dead easy – maybe too easy – to borrow money to buy a house, say, or a car. But to save money? Not so easy. It’s what economists call a “disincentive.” To the rest of us, it’s just a raw deal.
For young women just starting out in the working world and building a nest egg for the first time, for professional women with established careers and perhaps a family, for older women nearing retirement, some with a considerable sum socked away…it’s the same problem. Where do you find decent yield in a low-yield world? It’s not easy. But with the right guidance, there are ways to invest your money, at a risk level that lets you sleep nights, with a decent return to boot.
Speak to a financial advisor about the various income funds available that invest in a mixture of government and corporate bonds, and dividend-paying stocks. Some of these funds have been around for 20 years and more. And some have returned an average of 9% or more over those 20 years. Even using an average 5% return, that same initial $1,000 with a $200 monthly investment for 30 years would grow to over $170,000, with nearly $100,000 of that coming from investment return. It beats a “savings” account hands-down. And if you use a Tax-Free Savings Account to invest, you’ll never pay a cent of tax on any of that income! – R.T.
Robyn Thompson, CFP, is the founder of Castlemark Wealth Management, a boutique financial advisory firm, specializing in customized financial, investment, insurance, and retirement planning. She appears regularly as a financial planning expert on CityNews Channel. Phone 416-828-7159 or email today to rthompson@castlemarkwealth.com for a no-obligation, no-charge Castlemark Integrity Financial Planning consultation.
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