How to Make Money With Your Savings

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Once you know that there are options for growing your savings tax-free (TFSA, FHSA or RRSP), you need to know the steps to take for your savings to continue growing. So, let's talk about types of investments.

You are probably thinking, "why should I bother with investments if I already have a savings account?" Because of the increase in the cost of living! Money loses its value over time.

Think of recent years: the number of things you could buy at the grocery store with $100 is not the same today as it was 5 years ago. This is what we call inflation. Therefore, to offset inflation and to ensure that your money retains its value over time, you need to try to earn a return on your investments that is at least equal to the increase in the cost of living.

High interest savings account and Québec savings bonds

For your emergency fund, you can, for example, choose to invest your money into a high interest savings account, or, at certain times during the year, into a Québec savings bond. These are both good options for an emergency fund because you can withdraw your money at any time, just like a normal account, but at least it will yield some interest.

However, interest rates are lower than for other types of investments. Once you have established your emergency fund, keep investing your money elsewhere! It will be more profitable.

Guaranteed investment certificate

Are you afraid of the unknown? If you want to invest without the risk of losing your money, but you want to earn more interest than with a high-interest savings account, you can choose a guaranteed investment certificate.

As its name suggests, everything is guaranteed. You invest your money for a pre-determined period, at a known interest rate, and get it all back at the end, including interest.

The only downside is that, in the meantime, you will not be able to access your money. But if you want to invest over the long term, look into other types of investment that will offer you a better return.

High-risk investments

Let's take a look at two options that could allow you to earn more money with your savings, but that come with some risks.

Important: before placing your money into this type of investment, you need to know your investor profile to find out if it is right for you. A list of questions from your financial advisor or financial institution will help you determine whether a fund is right for you. The Autorité des marchés financiers also offers the Your investor profile This link will open in a new window. online questionnaire.

Mutual funds

In mutual funds, amounts of money are gathered by investors like you, for example, and managed by a fund manager. They are invested in different types of investments, such as company stocks or bonds:

A company stock is a share in the company that you buy in the hope that its value will increase or that the company will pay you a portion of its profits.
Buying a bond is when you lend money to a company or government and then you earn interest on it.

The profit you can make with mutual funds, known as returns, is variable. It is not known in advance, because it depends on the evolution of the stock market and the decisions made by the people who manage each fund. If you are aiming for a long-term return, this could be a good choice for you. The value of your investment will increase and decrease frequently over the years, but after several years, it will certainly be worth it.

When you have money in a mutual fund, you pay management fees. Managers are required to disclose these fees. Find out how much these fees are going to cost you, because they can have a significant long-term impact on your investments.

Exchange-traded funds

There are also exchange-traded funds (ETFs), if you want to be more independent. When you invest in an ETF, you are buying a share in a group of securities that are traded in the stock market. This can be an opportunity for you to diversify your investments by buying several stocks in a single transaction.

As with mutual funds, returns are not guaranteed. Generally speaking, ETF returns are interesting over the long term. In the short term, it can vary widely.

The advantage of ETFs over mutual funds is the low management fees. There are several types of exchange-traded funds, some of which are asset allocation, which can be a good way to get started. Asset allocation means that the ETF does not only contain stocks or bonds. It is a mix of both, and the ETF rebalances itself to maintain the desired allocation.

For more information, consult the Exchange-Traded Funds (ETFs) This link will open in a new window. page on the Autorité des marchés financiers' website.

Good to know

You invest money to make money. But remember: if your investments generate interest income, dividends or capital gains, you will need to include them on your income tax return, unless your investments were in a tax-free savings account (TFSA), a first home savings account (FHSA) or a registered retirement savings plan (RRSP). We talk about it on the TFSA, FHSA or RRSP: why do you need one? web page.

Now you know how to invest the money you will manage to save. Making a balance sheet at the end of each year is a great way to stay motivated! You will be able to calculate the net value of your savings, which corresponds to your assets minus your debts. You will be able to track the evolution of your financial situation, and you will certainly find that it is reassuring to have some money set aside. You will also receive investment statements, which will show the value of your investments each year.

If you want more information, the Autorité des marchés financiers has an entire section on investments This link will open in a new window. .

Who can help you manage your investments?

If you need help, you can go see a financial advisor at your caisse, your bank or at a specialized firm.

If you want a long-term plan to help you reach your savings goals, you can consult a financial planner. A financial planner is a person who has a diploma from the Institut de planification financière and a permit from the Autorité des marchés financiers (AMF). It is a protected title, which means that it requires training to be able to use it.

In any case, find out how these professionals are compensated and what fees are charged for their services (management fees, commissions or advisory fees). If there are none, they may be paid by the institution selling the investments.

Financial advice and social media: a word of caution

Financial influencers, also known as finfluencers, can make the world of finances more accessible through popularized and sometimes highly inspiring content. However, beware of promises of easy gains. If it sounds too good to be true, it probably is.

The Autorité des marchés financiers suggests a few things to think about before trusting the advice of a finfluencer: Following a finfluencer This link will open in a new window. .

If your investment needs are fairly simple and you have time to spend managing your investments, you could also do it yourself. However, a financial advisor can guide you through more difficult times. It is worth considering!