earned
Factors affecting individual saving plans
Savings can be maintained in liquid-form, in the form of
accounts in banks along with their investment in long-interval
instruments such as government bonds. The various factors
which impact the individual saving plans include the following:
Level of Income: With the increased income-level, the number
of individual saving plans rises as the individuals would be able
to save and invest more. However, the situation of boom could
also result in increased expenditure as individuals with more
income are supposed to borrow money from banks so as to
supply funds for purchasing luxury articles.
Income Allocation: Basically, the low income people would
have fewer saving. However, with increased income,
diminishing marginal utility takes place which results in
encouraging individuals to invest more.
Interest Rates: Higher interest rates induce individual saving
plans as people are encouraged to invest more due to expected
high returns for the savings made in a bank. However, the
situation may not be similar in some cases, For instance: in case
of recession during 2009, the interest rates were reduced to
0.5%, this still resulted in increased saving plans as individuals
preferred to avoid much consumption and more savings.
Inflation: High inflation works inversely in case of increased
interest rates, say, interest rates of 10% with inflation level of
14%, in such a situation interest rates would be negative and
people would no longer be induced to invest.
Level of Optimism: Various uncertain circumstances such as
level of unemployment, high inflation etc. would make an
individual pessimistic and accordingly, there would be less
spending and increased savings for contingent situations.
Demographic factors: Particular life-stage also impacts the
saving plans. For Example: young people are expected to get
finance for different purposes like education, purchasing cars,
home etc. At the age of 40-50, they are expected to save more
due to increased income. However, retired people could enjoy
their savings by consumptions still such conditions may vary
from person to person.
Thus, different variables have their impact on the
consumption level which could have a further direct or indirect
impact on saving plans.
Determinants to be considered before investing into
individual saving plans
For the fulfilment of various short as well as long-term
objectives, investment in a saving plan is a best option. There
are different schemes available in the financial market, however;
it is essential to conduct a complete market research before
reaching to a final decision of investing in a particular saving
plan. Following factors should be taken into consideration
before making investment decision in any individual saving
plan:
Introduction
The banks in Canada are acknowledged as the safest banks
worldwide and well equipped with plans for future challenges.
There has been a lot of financial restructuring of banks in
Canada throughout the 1980s and 1990s. According to Engert et
al. (1999), at present, the topmost banks of Canada facilitate
customers with multiple investments, saving, and insurance
plans to assist them towards financial stability. However, there
are different variables which impact such saving plans. Proper
consideration should be given before finalising any
saving/investment decision as such decisions have a direct
impact on the financial soundness of an individual making such
investments.
Relevant Saving/Investment and Insurance Plans
There are different saving and investment options available
through which an investor can contribute a certain sum of
money and earn return based on such plans.
Tax Free Saving Account Plan (case of Royal bank of
Canada):
TFSA is the Tax-free Savings account that the RBC (Royal
Bank of Canada) provides to the customers as a registered
investment account. This scheme deducts zero taxes on any
investment earning made. The exclusive benefits under this
scheme give the customers free access to the digital tools and an
in-person advisor, or over the telephone and video conferencing.
There is no specific amount to open a TFSA, and as the earned
money from investments is not taxed, thus it grows faster in
comparison to a non-registered account.
One can also set up a regular automatic contribution into their
TFSA registered account, which would result in a faster growth
saving. The TFSA can be a good investment option for short or
long-term goals, where your investment earnings or the
withdrawals are not taxed. The age ability to contribute to this
plan is also applicable beyond 71 years.
Registered Retirement Saving Plan (case of Royal bank of
Canada):
Registered Retirement Savings Plan (RRSP) is the
registered investment account that proposes distinct tax benefits
for future assistance. The RRSP scheme of the Royal Bank of
Canada lets the customers plan and saves for their retirement by
shelving the taxes on the earnings from this investment type.
There are different plans like Individual RRSP, Spousal RRSP,
Group RRSP, Locked-in RRSP provided as per the requirement
of an individual or a group, etc.
Similar to the TFSA plan in the RBC, RRSP also facilitates you
with in-person as well as telephonic and virtual assistance along
with setting up regular, ongoing contributions. RRSP plans
majorly contribute as a retirement plan where your contributions
are tax-deductible
8.
References
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