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What's a pre-authorized contribution (PAC) plan?


June 30,2021

Author: Martha Harbell



A pre-authorized contribution (PAC) plan transfers a set amount of money from one of your accounts and adds it to your investment or savings account on a regular basis. Also known as an automated savings plan, this is a great way to earn more interest on your money and save faster - without any work on your part!

It’s simple:

  • Decide how often you want to add your contributions (weekly, bi-weekly, monthly, etc.)
  • Choose how much money you want to contribute each time

That’s all you need to set up a PAC plan!

4 reasons to set up a PAC plan right now

1. Reach savings goals faster

PACs help you plan out your savings. You know how much and how often you’re contributing, so it’s easy to calculate how long it'll take you to reach your savings goal. Do the math with our Savings Calculator.

Plus, PACs help you save faster. When you contribute regularly, even if it’s just a little at a time, you’ll earn compound interest throughout the year (this means that you earn interest on your initial deposit and on the interest you’ve earned).

2. Stress-free saving

With a PAC plan you save automatically, without even thinking about it. Believe it or not, this has big mental health benefits! Money is a major source of stress for a lot of us, so having a plan in place to make automatic progress on your financial goals can help with your confidence and security.

Plus, you can use a PAC plan to contribute to your RRSP and TFSA. You won’t have to worry about coming up with a lump sum payment before the RRSP contribution deadline, or you can use it to meet your TFSA contribution limit faster.

3. Take control

A PAC plan can help you to stick to a budget. Ever heard the saying “pay yourself first”? It means that before you spend lots of money on non-essentials, you add some to your savings. This will earn interest that you can use for your future plans or unexpected expenses. By transferring money to your savings or investments automatically, a PAC plan helps you resist spending that cash on something you don’t really need.

Also, you’re not locked-in to any kind of commitment - you can change your PAC settings any time. This means you can start small and increase your PAC later if it’s in your budget, or decrease your PAC if money’s tight.

4. Start early and earn more

The longer you wait to start contributing to your investments and savings, the more you’ll need to add later in order to catch up to your goals. Plus, you lose out on earning more interest. That’s why some people call this the “cost of waiting.” Think of it this way - if you started contributing $100 each month when you’re 30, you would save almost twice as much as you would if you started contributing $100 each month when you’re 40.

A great way to start saving

Check out our High Interest Savings Account - you earn interest plus you get easy access to your cash whenever you need it with no penalty fees.

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A great way to start investing

Check out great investment options, like Qtrade Direct Investing, VirtualWealth®, and GICs.

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Learn more about saving

Saving in your 20s, 30s, 40s and beyond
Learn how to budget in 6 steps
8 tips on managing your money during a crisis

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VirtualWealth is a registered trade name of Credential Qtrade Securities Inc.

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