In this article, Rob Carrick provides a template for students to increase their monthly savings deposits by activating automatic withdrawal from their chequing accounts to their desired saving accounts. The process of automation relieves students of the strenuous task of consistently making the right personal finance decisions.

Appropriate Subject Area(s):

Personal finance

Key Questions to Explore:

• How do you set up automatic transfers?
• What are the benefits of automatic transfers?
• What are some means through which students can invest their funds to attain high returns?
• What are some skills and attributes necessary to be good at personal finances? (Discipline)
• What is the importance of setting a savings goal?

New Terminology:

Canadian savings bonds, Payroll Savings Program.

• The Canada Savings Bond (CSB) is a safe and secure savings product, fully guaranteed by the Government of Canada to help Canadians reach their savings goals. CSBs have a three-year term to maturity, with interest rates announced for one year and remaining in effect for that period. At the end of one year, new rates are announced by the Minister of Finance based on the prevailing market conditions.
• The Payroll Savings Program allows employees to contribute to a Payroll Savings Plan at their place of employment through automatic payroll deductions.

Materials needed:

A copy of the article.

Introduction to lesson and task:

The last three months of any year are usually the toughest months from a personal finance perspective because of the customary frivolous spending required for Halloween, Christmas, New Years’ etc.

Rob Carrick proposes an easy solution towards limiting spending throughout the year: automatic savings deposit. By setting this up, students will be able to anticipate long-term and short-term milestones ahead and save without actively thinking about saving. Such practice could enable students to build a respectable balance in their savings account over time to provide financial protection against emergencies and unforeseen events.

One of the reasons the Canadian Savings Bonds Program has been popular is the automatic payroll deduction feature. The process forces individuals to make the right decisions, with minimal effort – it’s almost like breathing.

A question students will have to confront after putting aside a portion of their income is: “What is the safest way for me to invest these funds and generate the highest return possible?”

A high interest savings account at a student’s local bank is an obvious choice. There are other options which can generate higher returns, but most of these come with higher risk. A relatively safe option with higher returns than a local bank is an online savings account at one of the banks listed at the bottom of this article. However, students are advised to do their due diligence before depositing funds in these accounts. (Also, there are age restrictions to opening up online banking accounts which students must comply with.)

This article provides an opportunity for teachers to speak candidly with their students about the importance of saving a portion of their income and maximizing returns on their investments. Teachers should caution their students against signing up for fraudulent online accounts, which promise high returns but never deliver. Teachers should also emphasise the importance of conducting due diligence before investing funds in an online bank account. Finally, teachers could use this opportunity to inform students about the Canadian Deposit Insurance Corporation (CDIC) protection which protects Canadians’ deposits held at Canadian banks (and other member institutions) up to C$100,000 in case of a bank failure.

Action (lesson plan and task):

• Ask students to state their personal savings goal, if they have any, and how they plan on meeting this goal.
• Ask students to indicate through a show of hands:
  • If they have savings accounts.
  • If they have set up automatic transfers to their savings account.
• Ask one of the students who answered yes to both to explain the benefits of setting up an automatic transfer to his/her savings account.
• Ask a student who answered yes to the first but no to the second to explain why he/she has not set up an automatic transfer.
• State the benefits of setting up automatic transfers.
• Let students know that automatic transfers can be cancelled at will, and the money can be withdrawn from the savings account.
• Ask students to explain why it is important to make saving like breathing. (Because you automatically save without thinking about it. As a result, you will be forced to spend wisely.)
• Ask students to list some of the long-term costs they anticipate in future.
• Ask them to state their plans to finance these costs. (College/university tuition, purchasing a car, etc.)

Consolidation of Learning:

Divide students into four groups:

• Ask group A to explain how to set up an automatic transfer to a savings account.
• Ask group B to explain how to stop or modify a savings account.
• Ask group C to explain how to explain how to set up a savings account at an online bank.
• Ask group D to explain what the set of numbers on a cheque signify. (The first 4/5 numbers are the Transit/branch no., the middle 3 are the institution number, and the final 7 are the account no.)

Success Criteria:

• By the end of this lesson plan, students should be able to state the benefits of setting up automatic transfers.

Confirming Activity:

• Ask the class to calculate the total amount they will have after a year if they put $300 into a savings account today and then save $50 from their bi-weekly paycheques into this account. Assume interest rate is 1% annually. (Answer: $1616.65).