Banking Basics

A bank account is an agreement with a bank that allows you to keep your money in the bank and take it out when you need it.
Interest is the cost of using somebody else's money, and you can earn interest by lending your money to the bank.
Banks are licensed to receive deposits, make loans, and provide financial services, and are managed by the national government in Canada.
Bank deposits are guaranteed by the CDIC (Canada Deposit Insurance Company) up to $100,000 per person per type of account.

Banks: financial institutions licensed to receive deposits and make loans, such as TD Bank, Scotiabank, CIBC, BMO, and RBC.
Trust companies: legal entities that act as a trustee, being the intermediary between borrowers and lenders, such as Canadian Western Bank, HSBC Bank Canada, and Citibank Canada.
Credit unions: provincial cooperative saving and lending associations that are owned by their members, such as Servus Credit Union.

When you open a bank account, you're accepting the responsibility to:
- Track your balance to avoid overdrafts.
- Check your account regularly to report any errors or suspicious transactions.
- Safeguard your account information, debit card, cheques, and PIN.

Financial institutions can pay you interest because they lend your money to people for mortgages and loans.
Having one or more bank accounts is a good way of establishing a credit rating or indicating that you are responsible with money.
There are several types of accounts, including chequing, savings, and money market accounts.
Debit cards are a convenient way to access your money, but be aware of potential fees.
Electronic banking services, such as ATM networks, telephone banking, and mobile banking apps, make it easy to manage your account.

Many banks offer student accounts with no monthly fees, but be aware of other fees associated with these accounts, such as over transaction limit fees, out-of-network ATM fees, overdraft fees, and NSF fees.
Read the fine print and understand the fees associated with your account to avoid unexpected charges.

Interest is the percentage of principle charged by the lender for the use of their money.
Simple interest is calculated as a percentage of the principle, while compound interest is calculated as a percentage of the principle plus accrued interest.
The Power of 72 Calculator can be used to calculate the number of years it will take to double your money at a given interest rate.
Fixed income investments, such as GICs, treasury bills, and government savings bonds, offer a guaranteed interest rate and protect your initial investment.
Equity investments, such as buying and selling stocks on the stock market, offer no guarantee and your investment could increase or decrease in value.### Stocks and Mutual Funds
If a company loses money, stockholders may not make a profit and might even lose their initial investment.
Stocks can be bought and sold on the stock market, such as the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX).
Stocks can be traded at any time, with no fixed term.
A mutual fund is a portfolio of stocks managed by a professional to make money for investors.
Investors can buy and sell pieces of the fund at any time, with no fixed term.
There are different types of mutual funds, including those with varying levels of risk, focus on specific industries, or focus on specific countries.

A Registered Education Savings Plan (RESP) is a special savings account for education after high school.
As of 2007, individuals can invest up to $50,000 in an RESP.
The federal government adds $0.20 for each dollar contributed to an RESP, up to a maximum of $500 per year.
RESP investments can be boosted through government matching programs and compound interest.
A Registered Retirement Savings Plan (RRSP) is a special retirement savings plan registered with the government.
Individuals can contribute 18% of their income or $26,010 (as of 2017) to an RRSP each year.
Contributions to an RRSP are tax-free, but withdrawals are taxed.
Starting RRSP contributions early can benefit from compound interest.

Credit allows individuals to borrow money with the promise of returning it with interest.
Credit enables individuals to pay for things they cannot afford all at once, such as houses, cars, and postsecondary education.
Credit is essential for countries, companies, and individuals, but it must be managed by building a good credit score, keeping debt low, and using low-interest credit options.
Credit comes at a cost, especially if loans are high-interest, leading to debt and financial hardship.
A credit score is a number that reflects an individual's credit management and is stored on a credit report by one of Canada's two credit bureaus, Equifax or TransUnion.

Individuals can manage their credit and build a good credit score by making payments on time, using less than 35% of available credit, building a longer credit history, limiting credit checks, and using a variety of credit types.
Lenders send information about accounts to credit bureaus, also known as credit reporting agencies.

Credit cards have an average 20% annual interest rate in Canada, making them a high-interest form of credit.
Using a credit card responsibly and paying off the balance each month can help build credit, but overspending can lead to unmanageable debt.

Payday loan companies offer short-term loans at very high interest rates and provide other services with high fees.
These services should be avoided and used only as a last resort, as the high interest rates can rapidly create debt.

If individuals don't pay off their credit card balance each month, interest assessed on their account means they may pay more for items than expected.
Overspending and accumulating credit card debt can lead to alarming interest payments.

Set up an emergency savings fund, typically 3-to-6 months' living expenses.
Establish credit, but maintain a good payment record and do not charge more than you can pay off in 1 month.
Start learning about investing and establish an automatic savings program to reach financial goals.
Rent within your means, understand your rights and responsibilities as a tenant, and take advantage of employer savings benefits.
Ensure adequate insurance coverage, such as rent, auto, health, liability, and disability insurance.
Start saving early, especially for a down payment on a home.