Canadian Personal Finance Blog
Personal Finances and Consumer Concerns, essays, stories, examples and how to articles with a distinctly Canadian Point of View
Case 1: Put it in the Bank
Friday, February 24th, 2006So this case is pretty simply. Our family has their $1000 per year extra going into an RRSP, and when they get the money back they put it in a savings account that pays 1% (yes this is not the best, but we need a baseline to start from).
| Savings Rate | 1.00% | |||
| Yearly Input | $1,000.00 | |||
| RRSP Return | 5.00% | |||
| Tax Rate | 30.00% | |||
| Year | To RRSP | Refund to Savings | Total Savings | Total RRSP |
| 1 | $1,000.00 | $300.00 | $300.00 | $1,000.00 |
| 2 | $1,000.00 | $300.00 | $603.00 | $2,050.00 |
| 3 | $1,000.00 | $300.00 | $909.03 | $3,152.50 |
| 4 | $1,000.00 | $300.00 | $1,218.12 | $4,310.13 |
| 5 | $1,000.00 | $300.00 | $1,530.30 | $5,525.63 |
| 6 | $1,000.00 | $300.00 | $1,845.60 | $6,801.91 |
| 7 | $1,000.00 | $300.00 | $2,164.06 | $8,142.01 |
| 8 | $1,000.00 | $300.00 | $2,485.70 | $9,549.11 |
| 9 | $1,000.00 | $300.00 | $2,810.56 | $11,026.56 |
| 10 | $1,000.00 | $300.00 | $3,138.66 | $12,577.89 |
| 11 | $1,000.00 | $300.00 | $3,470.05 | $14,206.79 |
| 12 | $1,000.00 | $300.00 | $3,804.75 | $15,917.13 |
| 13 | $1,000.00 | $300.00 | $4,142.80 | $17,712.98 |
| 14 | $1,000.00 | $300.00 | $4,484.23 | $19,598.63 |
| 15 | $1,000.00 | $300.00 | $4,829.07 | $21,578.56 |
| 16 | $1,000.00 | $300.00 | $5,177.36 | $23,657.49 |
| 17 | $1,000.00 | $300.00 | $5,529.13 | $25,840.37 |
| 18 | $1,000.00 | $300.00 | $5,884.42 | $28,132.38 |
| 19 | $1,000.00 | $300.00 | $6,243.27 | $30,539.00 |
| 20 | $1,000.00 | $300.00 | $6,605.70 | $33,065.95 |
So at the end of 20 years we have $33,000 in our RRSP and another $6600 in our savings account (and paying tax on the interest on the savings account too). This is not bad really, you now have almost $40,000.00 put away for retirement and a rainy day.
Monday, what if we use the refund wisely? –C8j
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