welcome to your money matters 2.0! your money€¦ · your money matters 2.0! 2 regardless of where...

1Your Money Matters 2.0!

THANKS TO TD FOR HELPING US BRING THIS RESOURCE TO SCHOOLS FOR FREE.

Financial literacy—understanding money—is a really important life skill to have. Your Money Matters 2.0! will introduce you to some of the concepts you need to know about money. What exactly money is, for instance. And how you can earn money. And, once you do, how you can manage it in the best possible way. You’ll be dealing with money all your life. Making the right financial choices is important, because your decisions about money will have consequences—and rewards.Some of the information in this unit may not seem important right now but—trust us—it will have significance in the years to come.Student loans. Credit cards. Saving for your studies after high school. These are just some of the money choices you may need to deal with in the near future. Now is a good time to start thinking about some of the options avail-able to you.

You can get started on some of these things right now. You can learn how to set up a bud-get. You can start saving up for something you want. And always remember, you’re part of a community, so think about charitable giving, too. Your Money Matters 2.0! also discusses in-come from work, savings, and investments. Investments are ways of making your money earn more money for you. No one expects you to open an investment account or start looking for a full-time job right now. But you should be aware that these options exist. At some point in the future, you may want to think about in-vesting in order to prepare and control your finances.We think Your Money Matters 2.0! is a good way to begin your journey to becoming more knowledgeable about money, to being able to spend and invest it wisely—and, we hope, al-ways having enough when you need it.

We all have different attitudes toward money. For some people, saving is very important. Many of our grandparents and parents lived through hard times. That has made them reluctant to spend money unless they have the cash ready. They’ll borrow for some purchases, like a house or a car, but very little else. Other families have no problem with the idea of borrowing money for something they want—they don’t worry too much about debt. Most people’s attitudes about money come from their family’s values. If your

parents think “saving is good,” then chances are, you will, too.

Talk to your family about money. • How important is saving money to your

family?• How important is staying out of debt to your

family?• Are your parents willing to wait to buy

something while they save up, or are they okay with borrowing money, or putting things on a credit card?

• Compare your ideas about money to theirs.

Family Values

You have a whole lifetime ahead of you to make money. You can get off to a good start by begin-ning early. There are lots of ways to earn money even while you’re still in school. You could get a part-time job, babysit, do chores around the house, or cut lawns in your neighbourhood. For some students, working while in school is nec-essary. For others, it’s a way to earn a bit of extra cash. Exploring different kinds of jobs when you are younger can help you to decide on a career direction for the future.

We all have to work for a living. How we get paid will be different, depending on the job. Most jobs pay either an hourly wage or a salary.

Wages means you get a specific, fixed amount of money for every hour you work. So your income will depend on the number of hours you work.

Some people earn a fixed amount per week or per month, regardless of the hours they work. That’s called a salary.

People working in sales often earn a commission. They earn a percentage of every sale, so their income depends on how much they sell.

And some people work-ing in jobs putting products together are paid for every item they make. This is called piece work.

Earning money

Y O U R MONEY MATTERS

Welcome to Your Money Matters 2.0!

What is an example of a job that pays by piece work and a job that pays commission?

ACTIVITY:

What are the advantages for the employee for each type of income?

Piece work:

Commission:

What are the disadvantages for the employee?

Piece work:

Commission:

Find two examples of jobs that pay a salary and two that pay hourly wages. What are the dif-ferences between these two types of jobs?

What career might you like to have after finishing school? You can explore some options at www.jobbank.gc.ca/home-eng.do. Look at the education you need, the earnings these careers offer, and how satisfied people are with those career choices.

Example 1: Example 2: What are the differences?

PAID A WAGE PAID A SALARY

ACTIVITY:

TECH IT OUT!You can test yourself. This QR code links to a Government of Canada website that helps you analyze your attitudes towards money, debt, and saving.

Your Money Matters 2.0! financial literacy program was developed by Toronto Star Classroom Connection. ® The TD logo and other trade-marks are the property of The Toronto-Dominion Bank

As we learned, there are only six ways to use money. Saving is one of them. Sometimes we really want to buy something for ourselves or as a present for someone else. We need money in the future for big-ger plans, like going to univer-sity or college, or taking a trip. Money you save now is money that will be available to you in the future. A proper savings plan helps make sure you have the mon-ey you need, when you need it. The key to any savings plan is careful bud-geting and setting financial goals.

Pay yourself first! In other words, make saving a pri-ority. If you’re still living at home, saving may not be too hard. Your family may cover most of your expens-es. Your income is most likely from a part-time job or an allowance. Most of your spending is probably for wants, not needs. Setting money aside for saving is a matter of making choices.

When you are just getting started in the real world, saving may be very difficult. Many of your expenses will be fixed expenses. You may have rent, a car payment, a cell phone bill, and food and

clothing expenses. They are in addition to the discretionary expenses you may have. You’d like to save, but there’s just no money left at the end of the month. And that’s the problem: many people save what’s left over instead of making savings the first item in their budget.

TO PAY YOURSELF FIRST MEANS: Before you spend money on discretionary ex-penses such as entertainment, set aside some of your income to save. The first bill you pay each month should be to yourself. Paying your-self first lets you build a stash of cash, a little reserve you can use in the future. Not only will your savings grow painlessly, you will have mon-ey for emergencies. You can use it for a major purchase. You can use it to save for your retire-ment. Paying yourself first gives you freedom—it opens a world of opportunity.

Saving

On a separate piece of paper, answer the following:1. List three things you spend money

on each month that would be fixed expenses.

2. List three things you spend money on each month that would be variable expenses.

3. If you needed to save some money, how could you change your spending?

4. How much money could you save in a month without giving up too much?

ACTIVITY:


Regardless of where your money comes from, there are only six ways to use money

Creating a budget is both the easiest and the hardest way of getting your finances in order. Planning and setting up a budget is easy. Sticking to that budget is usually pretty hard. Budgets are important because they give you an overall picture of what you’re doing with your money. A budget lets you focus on your short-term and your long-term goals. Because it tracks all of your money—the amount coming

in, your spending, and your saving—a budget shows you very quickly if you are spending too much, or if you have money left for special purchases. It warns you when you’re spending too much. Budgets are worthwhile, even if your only income is an allowance or an occasional few dollars from a babysitting job or paid chores.

Once you have earned some money, you’ll be able to spend it. Spending your money

wisely will help it go further. Wise spending can be things like looking for items that are on sale (at reduced prices), thinking about what kind of value the items you’re buying have, and using coupons that will give you discounts. If you have good spending habits, your money will last longer, and you’ll have more savings.

We all have needs and wants. Your needs are things you have to buy, for daily living. For instance, school supplies, clothes, shoes or bus fare. Wants are things you might wish to have

but which aren’t absolutely necessary for your daily living. For instance, video games, movie tickets or fast food.

Spending money is all about choices. After all, the amount of money you have is limited. You only have so much money to spend. Every dollar you spend on one thing is a dollar less that you can spend on something else. Spending money wisely will help your money go further. That’s where a budget comes in. A budget is a record over time of all the money you have, any money you make, and all of your spending.

Spending

Creating a Budget

FIXED EXPENSES:Fixed expenses are bills you have to pay, which are pretty much the same each month. If you’re living at home, you probably don’t have many fixed expenses, but they might include things like your cell phone bill or a transit pass. Later in life, you’ll likely have more fixed expenses, like rent or car payments.

VARIABLE OR DISCRETIONARY EXPENSES:Variable expenses change from month to month. You control them. Variable expenses are things like clothing, food, entertainment or gifts. Many vari-able expenses are for “wants” rather than “needs.”

Budgets need to be flexible. Some months, you may have more money coming in, or have more expenses. Your budget should take that into ac-count.

Let’s prepare a budget for a month. You need to know how much money, in total, you re-ceive each month. That is your income. You also need to list everything you spend mon-ey on each month. Those are your expenses. Split your expenses into fixed expenses and variable expenses.

Let’s look at some money vocabulary

Practice making your own budget using the on-line spreadsheet at www.classroomconnec-tion.ca/mybudget. Use your actual income (for instance, your allowance) if you have any, and real expenses. If you have a part-time job, look at your pay stub to find out your net in-come after deductions. (That means how much money you actually get, after money for things like “pension plan” has been subtracted from it.) Your hours may vary from pay to pay, so average the income out over several months. If you cur-rently do not have any income, practice making

a budget assuming you get $100 a month.

When you finish, review your budget. Did you manage to save some of your money each

month? If not, what could you cut back on to create some sav-ings?

Remember the earli-er comments about needs and wants? Sometimes it can be

hard to stick to a budget. It can help if, before making a purchase, you ask yourself:

• Is this something that I need or is it something I want?

• Can I afford it?• Is there a similar product available at a lower

price?• Do I need this right away or can I wait for it to

go on sale?• Is the price negotiable?

My budget Being frugal is not being cheap

• Compare notes with other students in your class about your needs and wants, and make a list of them all under the headings “Needs” and “Wants.”

• You earn $25 a week. Select one expensive need and one want and write a paragraph explaining how you could buy both of them, based on your budget.

1. You want to buy a new game console. It will cost $350 plus sales tax. You have saved $45 so far. How much money should you put away each month if you want to make that purchase in six months?

2. You are planning to go to university in two years. First-year tuition will be about $7,500. How can you make sure you have the money you’ll need in two years?

Think about it:


WAYS TO USE MONEY

1) Save it2) Spend it3) Invest it4) Loan it5) Borrow it6) Give it away

If you want to borrow money, you need to be able to convince the lender that you will pay back the loan. Your friend may lend you some money to go to the movies, but certainly expects you will pay that money back. As adults, lenders look at your credit history. They look at other loans you may have had and whether you paid them back on time. They look at your income, to see if you earn enough mon-ey to pay back the loan.

Types of credit You can borrow money in several ways:

PERSONAL LOAN—A loan is an agreement between a borrower and a lender. The lender provides money, and the borrower agrees to re-pay that money back, with interest, over time. Remember your friend who lent you money for that movie ticket? She wants the money back, and probably gave you a deadline to pay it back. (Although she’s probably not charging you inter-est.) Later in life, you may need larger amounts of money. That’s where banks come in. They are in the business of lending money. You sign a contract with the bank that explains exactly how much you owe, and how much interest you must pay them. It also says when you must re-pay the loan, when you will make payments, and how much those payments will be.

LINE OF CREDIT—A line of credit (LOC) allows you to borrow money at any time, up to a limit that you and the lender agree to. Think of it as a

pre-approved loan. You can borrow any or all of that money at any time. You can

borrow more as you need it, as long as you stay within the limits specified in your line of credit agreement. You can repay it faster or more slow-ly, as long as you make the required minimum payments. This is a less expensive way to bor-row, since lines of credit charge a lower interest rate than credit cards. It is there when you need it, is very flexible, but it doesn’t cost you any-thing if you don’t use it.

MORTGAGE—A loan that is used to buy real estate. Many people who buy a home will take out a mortgage to help pay for the home over a period of time.

CREDIT CARDS—Credit cards also lend you money when you make purchases using your card. It is a loan because you don’t have to pay for that purchase until the credit card bill arrives. Credit card companies send bills once a month. That bill lists all the purchases you made since the last bill, and how much money you owe. You then have two choices. The bill states how much you need to pay to repay all the money owed. It also states the minimum you must pay. That allows you to pay back the debt over time. The money you borrowed doesn’t cost you anything if you pay all the outstanding debt by the due date. However, if you don’t, or are late in making payments, credit card companies charge high interest rates on that debt.

APPLYING FOR A CREDIT CARDIf you want a credit card, you have to apply for it. When you do, the company offering the card checks to see if you are a good “credit risk”—that

is, whether you can afford the loan and are likely to pay it back. The issuer looks at your income, your history of paying bills on time, and other factors. If you are getting your first credit card, the issuer may set a limit on how much money you can borrow on the card.



People borrow money on credit to buy something now but pay for it in the future. Borrowing money on credit can be good

or bad, depending on how and why you do it.

Borrowing Money

HOW TO PAY YOURSELF FIRST: Get into the habit of saving regularly. That will make the process practically painless. You can arrange to have the money taken from your paycheque before you receive it.

That way, you’ll never even miss it. Start small. Start with $5 or $10 a week, or 10% of your monthly income. Increase the amount you save as your income grows. Paying yourself first is a sound financial habit.

HAVE A GOAL AND MAKE A PLAN TO REACH ITSaving works best when you know what you’re saving for. Set a goal. Set a time frame. Remem-ber to be realistic and flexible, because your goals may change. Have a short-term goal and a long-term goal. The short-term goal can be something you really want, but don’t necessarily need. It can be a reward for successful saving. Having a short-term reward like that will encour-age you to continue to save for your long-term goal. For example, a short-term goal may be to save $1,000 in one year to purchase a new lap-top computer.

Long-term goals take longer to reach. If you want to go to college or university, you will need money for your tuition. Your long-term goal could be to save the first year’s tuition in the next two years.

The strongest financial goals are specific and

measurable. Instead of saying you want to have enough money to retire comfortably, think about how much money you’ll actually need. Maybe your specific goal will be to save $1,000,000 by the time you’re 60. However, your goals should also be realistic. You may not be able to save that much money, considering your income. Look at how much money you can put aside without making your life too difficult, and plan accordingly. Setting priorities will help you to achieve your goals.

SOME EXAMPLES OF SPECIFIC FINANCIAL GOALS:• Pay off your student loan within the next two

years.• Save $7,000 for first-year university tuition.• Save $500 for the holiday season this year.• Save $350 for a new cell phone.Ask yourself: What are your top financial goals? When do you want to reach each goal? How much money will it take to reach each goal? How much can you afford to save each month toward each goal? Set each of your goals ac-cordingly.

EMERGENCY FUNDWhen you’re living on your own, it’s a good idea to plan for emergencies. Even now, while you’re living at home, having a reserve fund is a good idea. Unexpected expenses happen. You might break your cell phone, and you can’t always rely on the Bank of Mom or Dad to buy a replace-ment. Having your own rainy day fund will help. Use your savings plan to put aside some money each week or month, only for emergencies.

NEXT STEPSThe beauty of saving is that saved money earns you more money. Unless you stash your cash under your mattress, savings earn interest. Banks pay you money for having money in a savings account. Simple interest is a percent-age amount paid to you on the original amount (known as the “principal”) you put in the bank.

In addition, you’ll also earn more

money on that interest. That’s called compound interest. If your savings plan compounds an-nually, then the interest on your savings for the second year will be paid on the original amount (the principal) plus all of the interest you earned in the first year.

That continues as long as your money stays in the bank account. So, if you start early, you’ll have time to earn interest on your money, and interest on the interest, and interest on the inter-est on that interest... and so on!

THE RULE OF 72:One way to see the effect of compound interest is the Rule of 72. It’s a simple way of calculating how long it takes for money to double at a given interest rate. The rule of 72 is simple. 72 ÷ the interest rate = the number of years it will take to double your money. (This rule assumes that your savings compound annually.)

• Take the interest rate of an investment or a debt.

• Divide 72 by the interest rate.• The number you come up with is how

many years it will take your original investment or debt to double (assuming you don’t make any additional deposits or payments).

TRY IT: You have saved $2,000 in a savings account that pays 5% interest. • How long will it take for your money to

double—in other words, how long before you have $4,000?

• How long would it take if you were earning 6% interest?

• Create a graph showing the doubling time at 2.5%, 5%, 7.5%, and 10%.

THINK ABOUT IT!Your friend wants to borrow $20 until next week. What would you consider before lending him the money?

THE COST OF CREDIT CARDSIf you don’t pay your outstanding balance (the money you owe) in full by the due date, you will have to pay high interest on that debt. Howev-er, you can reduce the interest costs by paying back that debt as soon as possible. The sooner you make the payments, the less interest you’ll be charged.

Here are some ways you can save money with your credit card use.• Pay the outstanding balance in full each month.

• If you can’t, don’t add new debt to the card account, and pay as much as you can each month.

• If you can’t make the full payment, pay a fixed amount each month. At the very least, pay the minimum amount plus a little extra.

• Pay your bill on time to avoid interest charges. To be sure, pay it a few days before the due date, or arrange to have your credit card bill paid automatically from your bank account.

• Don’t take cash advances on your credit card,

except as a last resort, in emergency situa-tions only. If you must take a cash advance, make a payment towards it as soon as possi-ble.

• Limit the number of credit cards you hold, and keep your credit limit low to avoid overspend-ing and getting into trouble with debt.

Remember, credit can be good or bad. It’s all about how you handle it.

The Benefits and Risks of Credit CardsA credit card is just one financial tool. Like any tool, it can be great if used properly. If used incorrectly, it can create problems. For instance, credit card debt can be very expensive. Credit cards also give you money interest-free for a short period of time, if you always pay the balance when it’s due.



VOCABULARY CHECK: Let’s do a quick vocabulary check. Write a definition of these terms and use each one in a sentence. Explain why each term is important to your financial well-being.

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1. Buying with a credit card is really easy, but it has advantages and disadvantages. In the space below list three advantages and three disadvantages of using credit cards.

BORROWING AND DEBT:

1: 2: 3:

ADVANTAGES DISADVANTAGES

CREDIT LIMITEvery credit card has a credit limit—a maximum amount you can charge on the card before you pay it off. If you have no credit history, or a short credit history, you will usually start with a low credit limit. As you build a credit history, showing that you are a good credit risk, you will likely be able to get your credit limit increased.

GRACE PERIODCredit cards lend you money without charging you interest to make purchases. However, once you receive the monthly bill, you only have until the due date to make your payment. If you don’t make the full payment, you will then be charged interest. That period—from the time you get your bill until the money is due—is the grace period, and it’s usually a couple of weeks, depending on the card. The grace period only applies if you pay the full balance each month, by the due date.

CASH ADVANCESYou can use your credit card to borrow cash. That is called a cash advance. However, the inter-est rate on cash advances is usually much higher. And there is no grace period—you pay interest on the money from the moment you take out the cash until you repay it in full. Banks may also charge a fee for doing a cash advance. For these reasons, it’s best to use cash advances only in emergencies.

How credit cards work

2. Sometimes lenders ask for “collateral.” What is that?

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3. Suppose you want to buy an inexpensive car. Look at car ads in the newspaper or online. What is the price of the least expensive new car you can find? Now look at the fine print at the bottom of the ad. What extra charges will be added to the price? Then, add the sales tax, for a final total price. If you paid a $2,000 down-payment, how much would you need to borrow to pay for the car?

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4. Look up the interest rate on a typical car loan. What will your monthly payments be, if you plan to pay back the loan over 48 months?

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5. Add up your total payments. How much did the loan cost you?

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6. If you increased the size of your payments to pay off your loan in 36 months, how much money would you save on interest? How much more each month will you have to pay in order to save that interest? How much do you save, in total, by paying back the loan one year sooner?

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DO SOME RESEARCH:What is a “digital wallet”?

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How can you use a cell phone to pay for purchases?

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Make a list of the steps you have to take in order to put a cheque into your account using your cell phone:

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A thief can skim or swipe the information off the magnetic strip on the back of your card and use a hidden camera to capture your PIN. That thief can then create a duplicate of your card, and use it to take money from your account. Card fraud can also happen if you lose your card or you hav-en’t properly protected your PIN.

• Find out what is meant by the term credit card “skimming.” Write a paragraph explaining how it can happen, and how to protect yourself against it.

What if you find something suspicious on your account?Let the bank know immediately if there is any sus-picious activity on your account—for instance, a purchase you didn’t make. Contact your bank immediately if you lose or misplace a card. Banks will take steps to protect you. They may block your card temporarily to prevent further losses, ask you to change your PIN or cancel your card and issue you a new one.

Watch out!It’s up to you to take care of your own money, your cards, and to watch out for fraud. The Internet provides many new ways for hackers, scammers, and identity thieves to try to take your money.

No company, bank or government department will ever send you an email asking you to confirm your password or financial information. That can happen when you go into your account online, and only after you have signed in, but never by email. A bank may send you a letter, asking you to come in to discuss an account, but they will never ask you over the phone for your personal financial information or social insurance number. If you receive an email like that, delete it—don’t click on the link; if you get a phone call like that, simply hang up.

Many people shop online, using their credit card to pay. One way to protect yourself online is to use a separate credit card just for online purchas-es. Make it even safer by keeping the credit limit on that card very low.

And the latestOur cell phones have become an important part of our lives. Many people use their cell phone to do banking and online shopping. Some banks allow customers to deposit cheques to their ac-count via a cell phone. You can photograph the cheque with your cell phone and upload it to the bank. There’s no need to visit the bank or even an ATM. Cell phones are turning into digital wallets.

Credit and Debit Card Fraud Modern debit and credit cards use a chip and a PIN (personal identification number) for security. Even so, card fraud (theft, for instance) can still happen.

PROTECT YOURSELF!Your bank has security systems in place, but you need to do your part, too:

• Never share your PIN with others. • Memorize your PIN; don’t write it down.• Avoid obvious PIN numbers like your

birth date, part of your phone number, or simple sequences like 1, 2, 3, 4.

• Always protect your PIN when entering it on a keypad; use your shoulder or your hand to shield your PIN when you’re entering it at an ATM or a store.

• Change your PIN from time to time.

Bank AccountsRemember, part of good budgeting means making sure you have a plan for saving—paying yourself first. You could always just throw spare change into a jar every day, or stash some mon-ey in your sock drawer. But a better way is to open a savings account at a bank. That allows you to earn interest on your money, and if you save long enough, you’ll earn interest on the interest.

Savings accounts today usually don’t give you a lot of interest on your savings, but at least it’s more than if you tossed it in your sock drawer!

Canada’s banks offer a variety of different kinds of bank accounts to help you manage your mon-ey, depending on what your situation is. For in-stance, there are accounts for students that of-fer basic services without charging you extra for them. Some bank accounts let you automatically transfer money from one of your accounts to an-other, to make saving easier.

You can open a bank account by walking into any bank and speaking with a teller. All you need is two pieces of identification, perhaps a Canadian birth certificate, or an official photo ID. If you are under 18, your parents may need to have their name on the account as well. Choosing the right account for you, one that meets your needs now, is important, so let’s look at some bank account basics.

TYPES OF BANK ACCOUNTSThe two main types of bank accounts are chequing and savings accounts. Let’s look at how they are different.

CHEQUING ACCOUNTPeople use chequing accounts to pay bills. You can deposit money, write cheques, transfer money electronically, withdraw money from an automated teller machine (ATM) and even save money. However, these types of accounts some-times charge service fees. They also usually pay less interest than a savings account (or none at all).

SAVINGS ACCOUNT A savings account is just that: an account in which you keep money you intend to save. Usu-ally, you can’t pay bills or write cheques from a savings account. You are limited to fewer with-drawals, and you’re sometimes charged fees for moving money out of a savings account. On the plus side, savings accounts pay higher interest than chequing accounts.

The exact details will vary from bank to bank, so compare and shop around for the best deal that suits your needs.

Visit the websites of three financial institutions. Look at what they offer young people to start chequing and savings accounts. Compare:• service fees;• the number of free transactions;• the cost of cheques; and• the cost of transactions (transferring money,

paying a bill, etc.).

DEBIT CARDSMany people want to pay for their purchases without using a credit card or cash. There is an alternative: a debit card. Debit cards withdraw money from your chequing account, just like a cheque, and transfer it directly to the merchant who is selling you whatever you’re buying.

Using debit cards has become a way of life for many Canadians. Debit cards are also useful for other banking services other than simply buying something. You can use them to deposit money into, or take money out of, your bank accounts, without actually having to visit the bank. ATMs (automatic teller machines) are available seven days a week, twenty-four hours a day. Whether you’re withdrawing cash from an ATM, using your card for groceries or paying for movie tickets, your debit card is a simple way to access your money any time.

Debit card transactions do come with fees. Check your bank account’s rules; most banks allow some debit card transactions before charging fees. ATMs from banks other than your own, or non-bank companies (for instance, an ATM machine in a variety store) almost always charge extra fees for withdrawals from your account.



At some point, you may want to make invest-ments that offer greater returns—and of course, these will come with greater risk. Stocks are one such option. Stocks, also called shares, are part-ownership that you can buy in a com-pany. That share is a very tiny piece of owner-ship. Bombardier, the Canadian manufacturer of streetcars, railway equipment and airplanes, has issued 2.22 billion shares. That means more than 2 billion people own a tiny bit of Bombar-dier. Shares go up and down in value. When the company does well, investors’ rewards will be greater; when the company isn’t doing as well, investors won’t make as much money—and they may even lose money.

STOCK MARKET

The stock market or stock exchange connects people who want to sell stock with those who want to buy stock. In the past, stockbrokers used to meet in a large market hall where they bought and sold shares, a process called trad-ing. Today, all stock trades are done electroni-cally. Investors buy and sell stocks in a way that any investor can see, under rules that apply to all users of that exchange. Companies listed on a recognized stock exchange must follow the rules set by that exchange. For instance, they must file appropriate information about the company’s management team, and provide specific financial information about the compa-ny. Companies must also offer detailed financial information about the company to prospective customers. That’s so you know exactly what kind of company you’re buying into, when you purchase its stocks, and how likely they are to be successful and give you a high return on your investment.

Each stock exchange in Canada focuses on certain kinds of investments. Look up the main

focus of each of these Canadian stock markets:

• Toronto Stock Exchange (TSX) • TSX Venture Exchange• Montreal Exchange• Vancouver Stock Exchange

The buyers and sellers of shares set the value of individual shares. A seller offers to sell shares at a price, and a buyer offers to buy at a certain price. When they agree on the price, the shares sell. Here’s how it works:

• People compete to buy the stock if they be-lieve that its price will rise and they will make a profit.

• Sellers compete to find buyers for their stock at the highest possible price. There are usu-ally several investors trying to buy and sell stock in the same company at the same time.

It’s like a big computerized auction. Once a stock sells, the exchange posts the price so that everyone knows the latest price.

How much risk are you prepared to take?Investing in stock can be risky. The stock market and individual company shares go up and down in value over time. Bombardier Class B shares sold for $2.68 in June of 2006. In the Spring of 2016, they went as low as 95 cents. On June 27, 2016, they sold for $1.81. No stock market invest-ment is guaranteed. So, before you buy, you need to consider these points:

• What are the risks involved? While shares may go up in value one year, they may go down again the following year. Are you com-fortable taking these risks?

• How does the investment work? Do you understand the investment well enough to explain it to someone else? If not, this may not be the best investment for you.

• What are your investment goals? Are you

looking for income or growth, safety of your investment or a large return? Some invest-ments are safer than others, but risk increas-es the potential for earnings.

• Does this investment offer the returns you want? When you start investing, it may take many years for your investments to grow. If investments do not do well, it may take years more for the investments to recover. As you get older, you may not have the time to wait for your investments to improve and grow.

• Do you needed quick access to your money? How quickly could you sell the investment if you suddenly needed cash?

TECH IT OUT!CANADA SAVINGS BONDS: An example of a safe bond investment is the Canada Savings Bond. You can check out the details with this QR code. Savings bonds are insured and can be cashed in at any time. Interest rates are set each year.

The greater the risk of a loss on an investment, the greater the potential return (“return” in this case, means the money you earn or get back from your investment). The lower the risk of loss, the lower the potential return. There are several different options available once you have sav-ings that you want to invest.

We all know the meaning of the word risk. But what does that word mean when it comes to your money?• Risk is the reason why banks charge more for

credit card debt than on a normal bank loan. Explain.

• Under what circumstances might a high-risk investment be worthwhile?

Choosing an InvestmentLater in life, when you do have some savings, you will probably want to earn more money than a savings account offers. Those earnings are called returns on investment. Investments make money in three ways: 1. INTEREST

Investments pay interest, just like savings accounts, GICs, and bonds. With these types of investments, you know exactly how much money you will earn on your investment.

2. DIVIDENDS Some stocks pay dividends. When a compa-ny makes a profit, it can share that profit with investors by paying them a dividend. The amount of the dividend depends on how well the company did that year and what type of stock you own.

3. CAPITAL GAINS If you sell an investment, a stock, bond, or mutual fund for more than you paid for it, you’ll have a capital gain. That is your profit. If you sell it for less than you paid for it, you’ll have a capital loss.

Let’s look at some of these investments in more detail. GUARANTEED INVESTMENT CERTIFICATE (GIC)A guaranteed investment certificate (GIC) pays slightly higher interest than a savings account, but it also comes with some considerations. In return for that higher interest, your money is locked in for a set time. Think of it as a savings account that you can’t touch. When you buy a GIC, you are agreeing to lend the financial insti-tution your money for a set number of months or

years (the term). The borrower (the financial insti-tution) guarantees to pay back all the money you deposited at the end of the term, with interest. You don’t earn a lot of interest on GICs, but they are one of the safest investments.

• The minimum amount you can invest is typically $500.

• Most GICs pay a fixed rate of interest for a set term, such as 6 months, 1 year, 2 years or up to 10 years. (For instance, they may pay .7% inter-est over 2 years.) The term ends on the maturity date.

• You don’t pay any fees when you buy a GIC or when it matures and you get your money back.

Some GICs offer a variable interest rate—less in the first year, but more in later years. A GIC may pay interest only once a year or only offer simple interest at the end of the term. Others offer to compound interest. Some offer returns based on the performance of a benchmark such as a stock exchange index. In general, the longer the term, the higher the interest rate you will earn.

You need to know something about most GICs. Your money will, indeed, be locked in. With some GICs, if you need to get your money back soon-er, you will have to pay a penalty. Other GICs— called cashable or redeemable GICs—allow you to get your money back at any time with no pen-alty, but they usually pay less interest.

Banks are like any business—they can go out of business. However, Canadian banks are quite safe; only three small banks have gone out of business in the last 100 years, and none in the last 60 years.

Your money in a bank or GIC is protected against bank failure.

Investing

Stocks (or Shares):

One big difference between saving and investing is that investing always involves risk. If the value of your investment goes up, you could earn a bit more than you would in a savings account. But, if the value of your investment goes down, you could lose some or even all of your money.

DO SOME RESEARCH:

Look up Canada Deposit Insurance Corporation. What is this organization? How does it protect your

savings and GICs? ...............................................................................................................................................................

.....................................................................................................................................................................................................

What does this insurance cover? What are the limits? ............................................................................................

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The news is full of stories of people of all ages working to help their community. Some people give money to a charity, or donate furniture for a family rebuilding after a disaster. Doctors may volunteer at a clinic; a professional athlete may coach young people in her community.

Even young children, like eight-year-old Keyonah Cochrane of Innisfil, Ontario, can raise money to help their community. She set up a lemonade stand, raised over $100, and gave that money to help people caught up in the Ft. McMurray fire in 2016. Amanda Belzowski, with her parents’ help, set up a lemonade stand in front of SickKids hospital in Toronto 16 years ago, when she was two. Today she is 18 and has raised more than $200,000 for the hospital.

Giving back is not just about money. Your time is important, too. If you are in high school, you know that you need to complete volunteer hours as part of your high school diploma. High school students regularly volunteer at charities such as the Daily Bread Food Bank, in nursing homes or through community groups.

Giving back is an important part of being a mem-ber of your community. In 2013, nearly 45% of Canadians 15 or older volunteered in some way. Nearly two-thirds of people aged 15 to 19 volun-teered. The volunteering spirit goes on as we get older. More than 40% of people right up into their sixties and beyond continue to volunteer. In fact, older people tend to volunteer more hours. Ca-nadians donated about two billion hours of their time to do unpaid volunteer work last year.

Giving Back

In class, discuss the many ways you, as a group, could help your community.Select two local organizations that could use volunteer workers, and explain:• What does each group do? • Why would you help them?

Select two local charities that could use donations, and explain:• What does each group do? • Why would you help them?

Giving back means more than just fundraising and donating money.• What things can you do right now to give back to people in your school?• How could you volunteer your time to help younger kids in your

neighbourhood?• If you belong to a club, church or social group, how could you help your

community through that group?

TECH IT OUT!If you want to volunteer but aren’t sure how, check out this QR code. It links to Youth Connect, an Ontario government website about volunteering for young people. It has lots of great ideas about doing things to help others. Now that’s an investment with a great reward!

“We make a living by what we get. We make a life by what we give.”



Visit www.funtrivia.com/quizzes/world/currencies.html and discover lots of entertaining and informative quizzes about world currencies, ranging from easy to difficult. These quizzes will test your knowledge of the spending habits of people around the world.

Match up the financial terms in the centre column with their definitions on either side.

Game on! Test your financial knowledge

in this fun word game.

CAPITAL GAINSCOLLATERAL

COMPOUND INTERESTCREDIT

CREDIT BUREAUCREDIT CHECKCREDIT RATING

FIXED EXPENSESGRACE PERIODIDENTITY THEFT

INTERESTPIN

RULE OF 72SIMPLE INTEREST

STOCKS OR SHARESVARIABLE EXPENSES

WANTS

• The amount of money paid by a borrower to a lender in exchange for the use of the lender’s money for certain period of time.

• A lender or landlord’s inquiry at a credit bu-reau for the purpose of evaluating the credit history of an applicant.

• A secret combination of letters or num-bers you use to gain access to your account through an electronic device such as an ATM.

• An evaluation of an individual’s or business’s financial history and the ability to pay debts. Lenders use this information to decide wheth-er to approve a loan.

• A reporting agency that collects information on consumer credit usage.

• The time a borrower is allowed after a pay-ment is due to make that payment without adding to the interest owed.

• Interest is always calculated on the principal amount (original) amount.

• Items that are desired, but that are not need-ed to live.

• Profits from the sale of an investment.

• A criminal activity involving stealing some-one’s personal information and forging their signature in order to apply for credit in their name.

• Part ownership you can buy in a company.

• Amounts that vary from month to month.

• An expense that is the same each month, such as rent or a car payment.

• A way to estimate the time or interest rate you would need to double your money on an in-vestment.

• When a bank or business allows its customers to purchase goods or services on the promise of future payment.

• Calculates the amount of interest after a cer-tain amount of time. The interest for the sec-ond year is calculated on the original amount plus the interest made in the first year.

• Any assets of a borrower (for example, a home) that a lender has a right to take owner-ship of if the borrower doesn’t repay the loan as agreed.

UNLISTED CLUE: A _ _ _ _ _ _ _ _ _ _ _ _ allows you to borrow money at any time, up to a limit that you and a lender agree to.

Test your financial knowledge with our word challengeSearch the letters below to find the words listed on the right hand column of this puzzle. Words can run in all directions – up, down, right, left, backwards even diagonally and can even share common letters. One of these words has already been found.

APPRECIATEATM

BORROWBUDGET

CASH ADVANCECOMMISSION

CURRENCYDEBITDEBT

DIGITAL WALLETDIVIDEND

FINANCIAL GOALSFRAUD

GICLOAN

MORTGAGESPEND

VALUES

F CK M E N I G L J

HP A R P D

O FB U Y M S T A W E

Q GE W B X C D Y V E B

D T A K U H Z A T

R Q D C M

N C Z A P N A B S

Y A Q V Z G M Y Q

A W A F D X F

D V X Y T A J

C A I O P L E I D Z

J A R S X A L K

H F T U G Q N B O

C L M B

W R R O B

M D I V I D E N D U

O L

R I

C CN

O AA E

M SP F I N A N C I A L G O

M HP R F

I AR A C

S DE U R

S VC D E

I AI E D

O NA B C I

N CT I T

EE G T Y C N E R R U C

O

N I D

E G

T P E I

G S T I B D

A L

T

M

T

G L

E

L A V A

N A L

L

E

T

W

O

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