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8 solid reasons to set up PACs

Pre-authorized contributions (PACs) are an excellent way to save effortlessly, to make your projects a reality or to achieve financial independence. Here are their main advantages.
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1. Save without even giving it a thought
Putting money aside every month is a good habit but it takes discipline. And it’s easy to get off track and give in to the temptation to spend. As its name indicates, a pre-authorized contribution involves automatic withdrawal of an amount that is then contributed to a selected savings vehicle, such as a TFSA, an RRSP, an RESP or an investment account. You determine how much and how often. Whatever amount you choose to withdraw is automatically saved.

2. Enjoy the magic of compound interest
The longer you leave your money in an account that generates a return, the more interest you’ll accumulate, and the more the investment will grow because the interest will be reinvested. Obviously, everything depends on the type of account and the rate of return, but it’s an effective savings strategy.

Here’s an example: if you contribute as little as $50 a week to your TFSA for five years (a total of $13,000) with a 5%1 rate of return,  your accumulated balance will be $14,730 at the end of the five years. After 10 years at the same rate of return, your $13,000 will have grown to $18,799. The return and compound interest will have generated $5,799! That’s not too shabby! See the magic of compound interest at work with this online simulation tool.

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3. Avoid emotional investing 
The stock markets see powerful rallies but also sharp declines. Investors who react emotionally may be tempted to buy when the markets are peaking or to sell when the markets are bottoming. This amounts to buying high and selling at a discount, or even at a loss, which is contrary to investment logic. PACs take emotions out of the equation: whatever happens on the stock market, you invest the same amount and you stay invested. You no longer have to decide whether the time is right to invest, something that is very difficult to predict.

4. Reduce risk during periods of volatility
By spreading the purchase of your investments over several periods, you can usually obtain a better average purchase cost per unit by smoothing out the market’s ups and downs. When the price is high, you buy fewer units and are therefore less at risk in the event of a selloff. During market downturns, you buy more units and will therefore benefit more when the market resumes rising.

5. Say goodbye to stressful RRSP contributions
Every year, a few days before the RRSP contribution deadline, do you hastily withdraw a large amount from your bank account and put it into your RRSP? Or do you find yourself having to borrow money to make a contribution? If either scenario is familiar, you can eliminate such worries with PACs. And when you receive your contribution statements, you’ll have the satisfaction of knowing your contributions were stress free!

Dire adieu au stress

6. Set up an emergency fund
The pandemic has taught many people the importance of having an emergency fund. In addition to helping you save for projects over the short, medium or long term, PACs can enable you to build a cushion. When you reach your target amount, you can redirect your contribution to other savings vehicles.

7. Enjoy great flexibility
If you have less money to save in some years, you can change the amount withdrawn and the frequency of the withdrawals at any time. For example, students could start with a modest amount and then increase it when they enter the job market.

8. Saving this way is child’s play

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1. Choose the account that you want to contribute to: TFSA, RRSP, RESP or Investment Account

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2. Choose the Fund in which you want to invest

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3. Pick an amount you want to put away regularly

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4. Choose a frequency that works for you – weekly, monthly, every 2 weeks, etc.

What about the disadvantages of PACs? There are none! It’s a small initiative that will pay off big in the long run. To set up pre-authorized contributions, contact us or go to the Client Portal and take one more step toward financial independence!

  • Already a client? Sign in the Portal to create your PAC

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Pre-Authorized Contributions (PAC) (a 3 minute read)


1  This return is provided only as an indication of the impact of the growth offered by compound interest. It is not intended to reflect the future return on an investment. It is assumed that no funds are withdrawn for 10 years.

This review has been prepared for the general information of our clients and does not constitute an offer or solicitation to buy or sell any securities, products or services and should not be construed as specific investment advice. All opinions and estimates expressed in this document are as of the time of its publication and are subject to change. The information contained in this document has been obtained from sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. The content of this presentation is the exclusive property of Gestion FÉRIQUE and should not be further distributed without prior consent of Gestion FÉRIQUE.