By Peggy Mulligan, C.A.
When we read a good detective

| rates can t

novel, we're kecnly aware that .

-- things are not always what they
scem to be. Yet we rarely have the
" same awareness when we stash our

hard-eamed money in the bank, |
The fact is, however, that in bank-

ing as in sleuthing it is usually

profitable to investigate beyond —

~~ what seems to be the obvious.
‘When you open a bank account,

_ for example, you may be told that it .
cams6 percent interest. Thatsccms ©

straightforward enough. But did

you know that there are two ways

oS that 6per centcan be calculatcd and.
that one: of them actually cams

slightly more moncy than the

Interest can be quoted ata
“nominal"rate or an “‘effective”

rate, sometimes known as “real”. If

you have $100 in your bank ac-
count and it earns 6 per cent inter-
est, compounded semi-annually,
you are actually eaming slightly
more than 6 per cent. - se
Here's how the real rate works.
For the first half of the year, your

ame aoe One an On, Con Ue Boalt wean tore

GY
Gl
$100 ears 3 percent interest, or$3.
That interest is “compounded” six

months after you cpen your ac-
count. That is, the $3 remains in

-your account and you now begin to.

earn interest on that interest. For the

remaining six months, you earn 3

per cent on your $100 plus 3 per
cent on your $3 of interest, At the
end of 12 months, you have
$106.09. This.means you eared 6
percent on your $100 ($106) and 3
per cent on the interest ($0.09); a
teal rate of 6.09 percent. —

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By comparison, with an effective

_ interest rate of .6 per cent, com-

pounded semi-annually, you end up -

with precisely $106 at the end of 12
: months. In essence, the effective
‘rate means that the-bank agrees to

pay you 6 per cent on your $100 at
the end of the 12 months. There-.
fore, you actually earn slightly less
than 3 per cent interest every six
months so that when the interest is

‘compounded your earnings after
~ the full 12 months will work out to

$106.

"Understand

rate options on
In order to get maximum caming

viously important to understand in-
terest rate options. It is also vital to

-understand the power of com-

pounding as banks offer a stagger-
ing array of compounding options
as well. oy .

Perhaps the most dramatic ex-

tbe eta yA eke tee TR eee

worth $6,527, Invested ‘instead at
10 per cent, compounded semi-an-
nually, your $1,000 would grow to
$7,040 over the 20 years. ©

_ If it seems to’be a lot of work to
wade through and. compare the.

benefits of different types of bank

_ power from your savings, it is ob- .

ample of the power of compound —

ing is one that is familiar to many
— the RRSP. If you invest $1000 at
10 per cent compounded annually,

in 20 years ‘your RRSP would. be - |.

Timely tips to help you

keep track of y

Sometimes it's easy to forget that. __borrowexcannothandleit. Ask the.

what you buy you have to pay for.’
So here are a few guidelines to help
you keep control of your financial.
affairs, especially your debts.
They're courtesy of those who
know. most of all about moncy —
your friendly neighborhood
bankers. Theysay:. .-
@ Make a budget for yourself. and
~ stick to it, Make sure you know
~ what is coming in. and what is
_ going out. a
e Avoid impulse buying. Ask your-

self: If | had to pay in cold, hard

cash, would I make this purchase? -

Make a habit of comparison shop-
ping. Never buy anything, and
- that includes credit, without com-
-- paring costs and values.

' @ Always read and make sure you
understand application forms

* before you sign them.
e Be carefut of co-signing a loan or
~ guaranteeing a loan on behalf of
_ others, Remember that you could

same questions of the borrower
the lender would ask.

eBe knowledgeable about the cost.

of credit. Are you using the right

-- type fer your purpose? Are you .
using a more expensive form of -

credit than necessary. =.
Be ‘sensible about the number of
~ credit cards you use. How many

do you really need? Are you using

them simply because you have

Keep track
with receipts:

Keep track of all credit purchases. —

Save the receipts for checking
against the monthly statements and

for keeping a running total of your -

obligations, A suggestion: Get an
extracheque register (the part of the

cheque book where you keep track _].
of deposits and withdrawals). Use .

the “cheques” column for noting

credit payments: The “balance”
could record how much you owein.

“end up paying off the loan if the

os, cea

Brodie, CGA.

Terrace,

|. DEMERS & BRODIE
|. Certified General Accountants
 Specializingin
‘computerized and manual
accounting and
-. pookkeeping for ||
. Small Business {|

Donna Demers, C.G.A. | |
"a, - 4623 Lakelse Avenue"
, B.C. VEG IPS

our money

total. :
Remember, whether you usecash,
a cheque, a card or loan to pay for

your purchases, check out the
réputation -of the merchant, the .
-Store’s return policies and the
‘product warranty. Using credit does.

not absolve you of your consumer
responsibilities.

(For further information about credit, write

for tha free booklet Credit Wise, The

. Canadian Bankers’ Associailon, Bex 1500,
* Station A, Toronto, Ont. MS5W2N8). |

accounts with different interest °

rates and varying compounding op-
tions, remember that you worked
hard for your money, so you should
make it work hard for you. 7
(Peggy Mulligan is with Price Waterhouse,
Chartered Accountants.)

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) |. . She Best R.R.S.P°

a tat) monn tance i See Ra a

Aas om

hue o.* ~
i ee

nly

_ Options Available i

* (4) Trust Companies .
-'* (7) Investment Funds *|"
* Flexible Plans. 7

* More Options —

_ Skeena Mall
Monday thru Saturday ©

9:30 a.m. to 6:00 p.m.
_ Friday till 9:00 p.m.

PALMER BUSINESS AND | _
“ACCOUNTING SERVICES |_|

_ Computerized/Manual

| Bookkeeping and Accounting ©
Payroll — Payables — Year End
_ Financial Statements

_ Personal. Income Tax—  —s|_—
- Typing and Secretarial Services ode

“Phone: 635-2104

Sut 722 Lakelse Avenue |
 (Tillicum Theatre Building) .-|-
i) “Terrace, B.C. V8G-IR6- ae

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