Investing Versus Savings

Jan 28, 2020 | Jennifer Balon


It was one of those particularly crisp November mornings that remind you of the approaching Saskatchewan winter as we drove the highway to school.  The youngest son was clutching a bank statement that showed a credit of $0.03.

“What is this?” He asked as he waved the statement in my general direction.

“Well, that is the interest you earned last month on the $700.00 you have in your bank account.  The bank pays you to keep your money there,” I replied.

“That isn’t much,” he said.

“No it isn’t, but there is something else you could do with your money – you could invest it with me.  That means you could use your money to make more money,” I said.

There was a bit of a pause in the conversation while the young Warren Buffet thought and before he said, “How much can I make?”

I smiled, “If you bought shares of a bank (so you would actually own part of a bank), you would receive a dividend of about 4.5%, which is about 9 times more than what the bank is paying you now.  If you kept investing, by the time you were finished university, you could probably afford to buy a small home.”

Jason liked that idea, but to make my investment proposition even more attractive, I decided to add an extra incentive:

“For every dollar you give me to invest, I’ll give you an extra fifty cents.  So, if you were to give me your $700. I would add an extra $350.”

Jason accepted my offer, and after school that day, he gave me $700 to invest.  With the additional $350, he bought 14 shares of Bank of Nova Scotia.  As his candy business grew, he continued to buy more shares, and re-invest all the dividends.  When he earns money, or receives some as a gift, he is careful to invest at least one-half.  He has also diversified over the years by purchasing units of a global mutual fund, and we have plans to buy more dividend-paying common shares.  I’ve managed to keep matching him fifty cents on every dollar, which is expensive but worth it – I suspect it will end up saving me money over the long-term.  He now has enough money to pay for two years of university or buy a small car, and he still isn’t out of high school.

And, he uses some of his money to do nice things for people, like buy lunch for his buddies.