Tag Archives: savings

How Much Money Will I Get at Various Rates for GICs and Dividends

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For many people, high school is a long time ago and math was never their favourite subject. Here’s a quick refresher to show how much money you will earn on money in a bank account, in a GIC or from dividends if you know the annual rate.

Rates Bank Advertise for Bank Accounts and GICs

If you go to a bank website, like at Tangerine.ca, you can see a list of the rates they pay for GICs and bank accounts. It is listed as a percentage, like 1.4%. The rate is how much money they pay for a year. Even though it may be a daily interest account, you won’t earn the advertised percentage unless you money stays in the investment for 365 days. This article will tell you how much money you would earn at that advertised rate on your savings.

Yields (Rates) for Shares or Stock in a Company

If you buy a share of a company in the stock market, it may pay a dividend. That’s a cash payment that may be paid once a month, once every three months, or once a  year. No matter which way they pay, they usually quote how much the dividend is per year as a percentage.

For example if you buy shares in Bell right now the dividend is about 5%. This article will also tell you how much money you would earn with a dividend of 5% based on the number of dollars of shares that you bought. For example, if you bought $2500 worth of shares, you would look below to see how much money the dividend is in the “you will get paid” column for $2500 at the percentage rate quoted for your dividend.

The maximum you can put into your TFSA for 2014 and beyond is $5500 a year, which is why I’ve included that amount in the tables below.

How Much You Will Earn per Year at 5% Annually on Your Bank Account, GIC or Dividend Stock

If the rate is 5% per year and

you invest you will get paid
$100 $5
$500 $25
$1000 $50
$2500 $125
$5000 $250
$5500 $275

If it’s a daily interest bank account you will actually get slightly more because you will get paid interest on the interest as well.

How Much You Will Earn per Year at 4% Annually on Your Bank Account, GIC or Dividend Stock

If the rate is 4% per year and

you invest you will get paid
$100 $4
$500 $20
$1000 $40
$2500 $100
$5000 $200
$5500 $220

If it’s a daily interest bank account you will actually get slightly more because you will get paid interest on the interest as well.

How Much You Will Earn per Year at 3% Annually on Your Bank Account, GIC or Dividend Stock

If the rate is 3% per year and

you invest you will get paid
$100 $3
$500 $15
$1000 $30
$2500 $75
$5000 $150
$5500 $165

If it’s a daily interest bank account you will actually get slightly more because you will get paid interest on the interest as well.

How Much You Will Earn per Year at 2% Annually on Your Bank Account, GIC or Dividend Stock

If the rate is 2% per year and

you invest you will get paid
$100 $2
$500 $10
$1000 $20
$2500 $50
$5000 $100
$5500 $110

If it’s a daily interest bank account you will actually get slightly more because you will get paid interest on the interest as well.

How Much You Will Earn per Year at 1% Annually on Your Bank Account, GIC or Dividend Stock

If the rate is 1% per year and

you invest you will get paid
$100 $1
$500 $5
$1000 $10
$2500 $25
$5000 $50
$5500 $55

If it’s a daily interest bank account you will actually get slightly more because you will get paid interest on the interest as well.

How Much You Will Earn per Year at 0.25% Annually on Your Bank Account, GIC or Dividend

Some bank accounts have really low interest rates. I know some actually pay only 0.25% a year.

If the rate is 0.25% per year and

you invest you will get paid
$100 $0.25
$500 $1.25
$1000 $2.50
$2500 $6.25
$5000 $12.50
$5500 $13.75

If it’s a daily interest bank account you will actually get slightly more because you will get paid interest on the interest as well.

How to Calculate How Much Money You Will Earn in One Year for any Rate and any Investment

You can calculate how much money you will earn in one year using a calculator and the following math:

  1. Type in the interest rate or the dividend yield. For example, for a rate of 3.25% type in: 3.25
  2. Press the divide ÷ or / key.
  3. Type in 100.
  4. Press the Enter or = key.
  5. Press the times * or x key.
  6. Type in the amount you have invested. For example, type in: 5500
  7. Press the Enter or = key.

For this example you would type:
3.25 / 100 = x 5500 =
and get
178.75
which means $178.75 is the amount you get for investing $5500 at 3.25% for one year.

You can see why it’s a good idea to save a lot for retirement!

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Have you ever thought you were getting $80 a year and then found out it was $8? With interest rates so low, it can be a real shock!

How to Choose a Self-Directed TFSA Brokerage Account to Minimize Fees and Costs

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Tax Free Savings Accounts, or TFSAs, first began in 2009 with a maximum annual contribution of $5000 for a Canadian who was 18 years of age or older. With that low an initial contribution level, they didn’t really offer much scope for self-directed investing. In each of 2010, 2011, and 2012, another $5000 in contribution room was added. Starting in 2013 $5500 per year in annual contribution room has been added. So a person who was 18 or older in 2009, and who has been a Canada resident every year from 2009 to the present, can now contribute or have contributed up to $31 000 $25,500 to a TFSA, not including any re-contribution of withdrawn funds. With $31 000 $25,500 plus earnings to manage, it makes sense for some investors to keep their TFSA in a self-directed brokerage account. When choosing a brokerage account, one aspect to consider is the fees and costs for holding and using the account. Here’s a review of which accounts have minimal or no fees and which accounts have high costs and commissions.

Please note there are actually two types of Tax Free Savings Accounts brokerage accounts, and those that can only hold a very limited number of investment choices which I call standard Bank TFSA accounts. For more information on the fees for basic bank TFSAs, please see the article How to Choose a Standard Bank Tax Free Savings Account, TFSA, with Minimal or No Fees.

Fees, Costs and Commissions for Self-Directed TFSA Brokerage Accounts

How to Choose a Self-Directed Tax Free Savings Account, TFSA, Brokerage Account with Minimal or No Fees

Some investors have a non-registered emergency savings account with 3-12 months income worth of cash and liquid assets, a topped up work pension plan, and a topped up RRSP. They often consider the TFSA as another long-term investing tool. These investors usually set up a self-directed TFSA brokerage account. They intend to buy stocks, bonds, ETFs and mutual funds from a wide variety of issuers. The self-directed account gives them the investing flexibility and diversity they demand.

BMO InvestorLine CIBC Investor’s Edge Qtrade Questrade
Set-up Fee  0  0  0  0
Transfer Fee  $135  $135  $125  $125 ($25 for partial)
Closing Fee  $135  $135  $75  0
Annual “Maintenance” Fee  0  0  0  0 if $5000 or if 1 trade per 3 months, or $19.95/3 months
Commissions to Buy Shares, ETFs $9.95 for everyone  if $50,000 assets
$29 if less		  $6.95 if $100,000 assets
$9.95 if $50,000 assets
$28.95 if less		  $9.95 if $50,000
$19 if less		  $4.95-$9.95
RBC Direct Investing Scotia iTrade TD Waterhouse
Direct Investing		 Virtual Brokers
Set-up Fee  0  0  0  0
Transfer Fee  $135  $150  $135 $125 plus tax
  $150 (partial $50)
Closing Fee  $135  0  $135 $125 plus tax  0
Annual “Maintenance” Fee  $25/3 months but 0 if $15,000 or various conditions are met  0 0
Update: July 2016:
$25/3 months but 0 if $15,000 or various conditions are met		  CAD TFSA $0
USD TFSA $50/year
Commissions to Buy Investments  $9.95 for everyone  if $50,000 assets
$28.95 if less		  $9.99 if $50,000 assets
$24.99 if less		  $9.99 for everyone  if $50,000 assets
$29 if less		  $0.99-9.99+6.49 per trade depending on assets

* InvestorLine has a minimum contribution to open any type of account of $5000. This appears to apply to TFSA accounts.

UPDATE: FEBRUARY 2014
In January and February of 2014, RBC Direct Investing, TD Waterhouse Direct Investing and BMO InvestorLine all removed the minimum balance requirement for accounts to qualify for $9.95 online trades. I expect CIBC Investor’s Edge and ScotiaBank iTrade will eventually reduce their requirements also but it hasn’t happened quite yet. Please check their websites for up-to-the-second details.

UPDATE: JULY 2016
CIBC Investor’s Edge offers $6.95 trades to all customers regardless of account size.

NOTES:
Generally you should expect to review your account statements online if you do not wish to pay any additional fees.

By Transfer Fee I mean the cost to transfer the TFSA to another financial institution. Generally transfers within an institution, for example from BMO InvestorLine to BMO, do not incur a fee.

Unfortunately fees and costs may be changed at almost any time. Before actually opening an account, contact the financial institution to confirm all costs. I’d hate to cause you a costly mistake if the brokerage raises its fees just after I issue this report!

Sources for the 2014 February Update

  • BMO InvestorLine: https://www.bmoinvestorline.com/public/pdf/schedule_en.pdf
  • CIBC Investor’s Edge: https://www.investorsedge.cibc.com/ie/benefits/fees-and-commission/fees.html
  • Qtrade: http://www.qtrade.ca/investor/en/aboutus/services/fees.jsp
  • Questrade: http://www.questrade.com/pricing/admin_fees
  • RBC Direct Investing: http://www.rbcdirectinvesting.com/commissions-fees-schedule.html
  • Scotia iTrade: http://www.scotiabank.com/itrade/en/0,,3694,00.html
  • TD Waterhouse Direct Investing: http://www.tdwaterhouse.ca/document/PDF/forms/521778.pdf
  • Virtual Brokers: https://www.virtualbrokers.com/contents.aspx?page_id=12

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Do you have brokerage TFSA? Did any costs come as a surprise? Please share your experiences with a comment.