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Looking for an easy and convenient way to start building up your savings for your short- and long-term goals? With Pre-Authorized Contributions (PACs), you choose the amount you’d like to contribute, and how often – for instance weekly, biweekly or monthly.
The beauty of a PAC is that it’s automatic. Once it’s set up, you’ll be saving money without even thinking about it.
Even small amounts saved regularly can add up over time. When your cash flow improves, you can then decide how much you can increase your contribution.
QUICK FACTS
57% of Canadians contribute money regularly to their savings and investments through PACs
(e.g., weekly, bi-weekly, monthly)1
Money contributed each month2
| Less than $100 | 11% | |
| $100 to $249 | 29% | |
| $250 to $500 | 28% | |
| More than $500 | 32% |
$356 the average monthly contribution2
Helps you stick to your plan
When it comes to saving, it’s sometimes easy to get sidetracked. A PAC allows you to make saving priority number one by ensuring you never forget to make a contribution.
Minimizes scrambling to meet yearly Registered Retirement Savings Plan (RRSP) deadline
With a PAC you’ll save automatically for your RRSP – all year round – and avoid the stress of meeting the RRSP contribution deadline and making a yearly lump-sum contribution.
Takes advantage of potential compound growth
Time is your biggest ally when it comes to saving. Saving over a longer period of time allows your money more time to grow and to benefit from compound growth.
When it comes to saving for retirement in particular, generally the earlier you start, the better off you’ll be, thanks to the power of compound growth. Saving for the long-term (e.g. for retirement) continues to be the leading financial priority for Canadians.1
Let’s take a look at how Compound Growth works
An animated bar graph shows “$200 monthly contribution with an assumed annual compound rate of return of 5%” over 30 years.
Each bar shows the value of the total monthly contributions and the growth of investment, with the growth of investment making up a significantly larger part of each bar as time goes on.
Eliminates the guesswork of when to invest
Research has shown that investing on a regular basis is much more effective than trying to “time the markets” – especially during periods of volatility.
Works with almost any budget
With a PAC, you determine what you can afford to save. Get started with as little as $25 per month.
1. Contribute more as you earn more
Setting up automatic contributions helps put you on the path to achieving your savings goals, but it’s easy to forget to adjust your plan as your financial circumstances change. It’s a good idea to revisit your PAC contributions on a regular basis – especially after major changes, like paying off student debt or landing a promotion. While it’s tempting to just set it and forget it, you’ll be amazed by how much more you can save by increasing your contributions – even a little.
In the graph below, we look at an investor who contributes $200 monthly for 15 years versus the same investor increasing their monthly contribution by just $25 each year.
A bar graph entitled “PAC contribution over 15 years” illustrates that a monthly contribution of $200 will earn $53,181 after 15 years, while the same contribution that increases $25 each year will earn $93,713.
2. Make it bi-weekly and save even more
Changing your contribution from a monthly basis to bi-weekly can be beneficial. You may be making bi-weekly mortgage payments. Do the same with your savings. It’s a small change, but the benefits can add up.
The example below highlights the savings advantage provided by switching to bi-weekly contributions over a 20-year period.
A bar graph entitled “Monthly vs bi-weekly contributions over a 20-year period” illustrates that one can earn almost $7,000 more when saving on a bi-weekly basis.
3. Get market volatility working for you
Market swings often make it difficult for investors to determine exactly when to invest – especially when trying to invest one lump sum each year. However, with PACs you can invest a fixed-dollar amount at regularly scheduled intervals. By contributing on a regular basis, you take advantage of the market dips by purchasing more mutual fund units when your dollar goes farther and in turn, lowering your average cost.
The graph below illustrates regular monthly contributions of $250 at the beginning of each month. As the mutual fund unit price fluctuates from month to month, the quantity of units purchased also changes (when the unit price is lower, more fund units are purchased; when the unit price is higher, less fund units are purchased).
An animation entitled “Get market volatility working for you”.
A bar graph shows the number of mutual fund units that can be purchased with $250 each month over the period of one year. A line graph over the top shows the unit price over the same period and trends inversely to the values of the bar graph.
Investing on a regular basis through Pre-Authorized Contributions is a great way to build your savings easily and automatically.
As you set out on the path to saving and investing, you’ll need to determine which products and/or investment strategies are right for you and your financial situation.
To determine the most appropriate savings and investing options, begin by asking yourself these three key questions:
- What are you saving or investing for?
- What is your time horizon to reach your goal?
- What is your risk tolerance?
Your Scotiabank advisor can help you determine which accounts or investments will help you achieve your short- and long-term savings goals.
Try our interactive PAC calculator to see how your savings can grow.
Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed or insured by the Canada Deposit Insurance Corporation or any other government deposit insurer, their values change frequently and past performance may not be repeated.
1 Source: Scotiabank, Scotia Global Asset Management, Investor Sentiment Research, Fall 2023.
2 Source: Scotiabank Investment Poll, July 2023.
