Group short-term savings plans? These are a thing, and apparently a popular one. What are they? An informal group can get together and regularly contribute to a pool every week. At their ‘goal week’, they are given a cash payout for their vacation. While banks and insurance companies have done a great job at providing products that are important to us, personal finance remains as bland and unappealing a topic as ever. And perhaps they haven’t ignited the excitement that comes from that feeling of financial empowerment. And yet here is a group of individuals known for living pay check to pay check, excitedly lining up to participate in a savings plan as they are finally motivated by the goal. Is this a cultural shift that millennial’s love their vacation, and even if we only have three weeks a year to enjoy it as much as possible, we want a financial plan that makes the most of it. While one could always start an Automatic Savings Plan and save on there own, like anyone trying to change and build a habit, this is easier done in a group (Running groups, writing groups, etc). Does this make long term planning any less important? No, of course not. But this type of idea gets people that run at the sound of TFSA or RRSP finally engaged with saving. Unconventional, but I like it. Building the habit is the most important, and this type of plan builds off that.
Last night I had the pleasure of attending an event hosted by Tangerine Bank and their ‘Forward Thinking’ Blog folks. Mostly attended by financial literacy bloggers and those in the industry, attendees were encouraged to bring their fin lit nerd side out and indulge spending the evening talking about saving and spending behaviours.
Hosted at Tangerine’s downtown cafe, the event brought together the minds of Preet Banerjee, columnist at the Globe and Mail, Krystal Yee and Cait Flanders, two high profile financial literacy bloggers (Cait is on year 2 of her shopping ban!, which she records her progress here: http://blondeonabudget.ca.) Joe Snyder and Silvio Stroescu, the final two panelists gave industry perspective on the future of banking and how to get to achieve your savings or retirement goals. Armed with a drink and a great crowd to mingle with, the evening really did seek to come up with what we can do to make financial literacy more accessible and how people can be in control of their finances however also gave the audience the chance to pick the minds of the individuals with their own questions in a ‘speed dating style’ event where you could sign up with the panelists after and get accessible advice in lieu of a formal q and a session.
points from the night I found value to take away from. Silvio brought up the stat that only about half of our population is retirement ready, or rather for every 2 people, 1 is retirement ready and the other is not. The easy fix for this is really just to identity what group you fall into, and if you do end up being in the latter, ask the person next to you what they are doing, and just copy them. Chances are that best practices and good tips are only a person away. Silvio also went on to talk about the incredibly bright future of mobile banking, promising that anything you can do in a branch you will be able to to with your mobile device, and your mobile will be able to leverage the relationship you currently have with your bank. From things such as investment advice, advice given to you that is based on your spending and behaviours to help you get to where you want to be. We all love Mint.com, however why not take it even further and offer more services to the customer. Joe Snyder mentioned at the event are current low interest rate environment, and stressed that while investing doesn’t have to be complicated, it should be part of your plan. Your savings alone will not get you to retirement, and having the discipline to put that first hundred dollars away each month into a low cost mutual fund or ETF will be a huge benefit to your future self. Krystal and Cait chimed in with the importance of living below your means and event making those short term sacrifices in lieu of long term success, reiterating that while delaying what you want to get might sometimes be painful, it is certainly worth it when it comes to setting yourself up to succeed. Preet added to the importance of knowing when and when not to borrow in our low interest rate environment, urging us only to consider leverage when we want to buy an appreciating asset (i.e. a house or an education). Caution is always helpful as a guideline whenever considering borrowing money as an option.
The event continued in an open format, and encouraged a strong conversation with regards to our personal finances and financial literacy. I comment Tangerine Bank for stepping up and celebrating Financial Literacy month with such a creative and fun event!
Recently I was given the opportunity (through my awesome employer, I may add), to ditch the daily grind for the day and head straight for the classroom! Although this time it wasn’t to learn, but to share some of knowledge and passion for financial literacy with a grade 7 classroom. With an adventurous spirit and the longest I have ever been on the Finch West bus, I eventually got to my destination at Humber Summit Middle School. The project was coordinated by
a wonderful organization that puts together programs such as the Dollars and Sense workshop we were able to facilitate with the kids. The day was geared towards teaching the kids about money. With the entire country (minus BC, which mandates financial literacy to be taught in high school) lacking the presence to allow kids to learn money sense in school, it leaves it up to programs such as these to introduce spending, saving and basic investment principals.
The day was an eye opener, and the eager students couldn’t take enough of it. Exercises that had them separate their needs and their wants showed them how little they really need. Examples that pointed out if they wanted to do something, sometimes the easiest is to make money themselves as opposed to expecting it form family. Budgeting exercises which simulated running a business and making decisions together as a team. Introducing money, saving, investment vehicles such as GIC’s, stocks and bonds. The program balanced instruction and teaching with lots of hands on learning through activities. We felt more like facilitators than teachers, happy to share our insights and keep up the energy for the days as the kids got creative with their money ideas.
They day was a lot of fun, and hope programs like these continue to flourish in schools!
The biggest misconceptions people have when tax planning. This year I was able to experience my rawest RRSP season yet. Throngs of Canadians, most of you reading most likely, wait until the very last minute before realizing that they need to make an RRSP contribution, both to amp up their retirement savings for their golden years, however also to amp up their tax refund by using their contribution to lower their taxable income for their income tax return for the filed tax year. A Registered Retired Savings Vehicle, or RRSP, allows eligible Canadians with earners income to deduct 18% of their salary by contributing that amount, to a ceiling of 25000, allowing the contributor to reduce taxes owing by the amount contributed. The RRSP allows Canadians to hold cash, fixed income, or securities in which the growth remains tax sheltered as long as it remains in the plan. Once retired, the plan holder is able to convert this RRSP to a Retirement Income Fund, or RIF, and then withdrawals are taxed as income, when the plan holder is in most likelihood in a lower tax bracket. This year, about a third of Canadians choose to contribute to such a plan (this number has lowered since the introduction of the Tax-Free Savings Account), many of them in a frantic rush to hit the first 60 days contribution, which means the cut-off to use the contribution as a deduction against the previous year’s income. Having just taken on a role at Canada’s largest direct bank, where one can do self serve banking online or via telephone, I was able to see some of the more common errors people make in ‘RRSP season’. The most common I choose to mention here, is in regards to the spousal RRSP. A spousal RRSP acts in much the same way that a regular RRSP does. The same investments can be held, and contributions work as deductions as well. How they differ seems to be the confusing area. The reason to open up a spousal RRSP is for two spouses to have equal income in retirement. Whereas one can have a large income, and might not have any income, a spousal RRSP allows a couple to ‘split income’ thereby effectively putting each in a lower tax bracket, reducing total taxes owing. Because a Canadian needs earned income to be eligible for a RRSP, this allows a non-income earner to accumulate a retirement fund in the same manner that an earner might. The key difference is that the non-earning spouse that is opening up a spousal RRSP will have to name a contributor who will be funding the plan, and that contributor will get a contribution receipt for the deposit into their spouse’s plan. However, this account is more commonly opened by the earning spouse, listing their non-earning spouse as the contributor, and then are wondering why the contribution receipt for income tax purposes comes in the name as the non-earning spouse who does not have any income to deduct the contribution receipt. Phew. Try hearing that for 30 days straight. While the distinction does make sense to offer this to Canadians, so many people make such frequent errors when it comes to this account, that I can only pass on a few tips to clarify the guidelines when opening up the account.
TAX TIPS WITH REGARDS TO SPOUSAL RRSP’S
- Who is going to retire on this money? Open the account in this person’s name.
- Who has higher income? They should be the contributor for this type of account. They will receive the receipt for income tax purposes to deduct the contribution against their earned income.
- I contributed. Who’s money is it? After the earning spouse contributes, it is no longer their money. That money is now the non-income earning spouse’s. If withdrawn within three years of contributions, the contributor will face the tax consequences. Once the money has been in the account for three or more years, any withdrawals will be taxed at the accountholder’s expense.
WHEN TO OPEN UP A SPOUSAL RRSP
- Your spouse makes less money
- Your spouse make no money
- Your spouse does not have an RRSP, and yours is maxed out.
Ideally, in retirement, for income splitting and tax-planning purposes, you and your spouse will have equal balances in your individual RRSP and their spousal RRSP.
They are old, out of touch, inconvenient and increasingly corporate focused. Financial advisors are increasingly being pushed further and further away from being able to properly respond to client’s needs. With corporately driven campaigns contrasting with the new needs of customers financial concern’s, it is no wonder that more and more people are turning to the internet as a way to patch together their personal financial lives.
Financial illiteracy still remains, despite the recent recession, one of the biggest issues in our culture today that is not being responded to. In Ontario, our government is more concerned with making sure our 8 year-olds know about homosexuality, 12 year old’s about oral sex and STD’s by the end of grade nine but fail to address the issue that many high schooler’s have no idea what the difference between a stock and a bond is by the time they graduate. Financial literacy, it is safe to safe, is not on the forefront of anyone’s minds. This then, is where electronic advice and the new ‘Robo Advisors’ come in.
I still use a real advisor, however it is on my own initiative, and I direct my own plan. As for advice, I do not receive much, and have to rely on what I think might be a good idea for my finances. I still rely on the old mantra, put as much away as possible (but it still fails to be enough). For the rest of the population that wants some direction without a pesky sidekick, this new trend solves a huge void. You can get moderately priced investments with direction at your choice. My question to you is, are you read for this?
Another major exhibit opens at the AGO this weekend in a big year booked for the Gallery. Ending the year last year was David Bowie, starting this year was the Guggenheim Collection and selected works from it, and ending this year will be Michelangelo. The current exhibit extensively features the work of the Canadian great, Alex Colville. Living in Toronto, we often times forget (or even don’t know) the landscape and characteristics of a country, much contrasted to life in the country’s biggest city, and this exhibit allows an accurate, simple and beautiful transportation to daily life in Atlantic Canada. Prominently featured is New Brunswick, where Colville studied, worked, married and lived. The exhibit even includes pieces that are part of Mount Allison University’s permanent collection, which are on loan currently to the AGO.
Colville’s pieces have the ability to display a slice of everyday life, however also leave to the view a number of questions and interpretations on what has just happened, what will happen and the story behind the scene in the paintings. The exhibit begins in his early career as well as featuring some works by others that were inspired by him (Included an impressively sized piece on loan from Winnipeg created for Canada’s centennial). After his graduation from Mt. A, Colville enlisted and was sent over to Germany, viewing the aftereffects of the war and the brutality of the concentration camps firsthand, portrayed in a few of his works. After the war, he went on to lead a rich artistic career as well as family life, having four children with his lifelong love. The exhibit is exceptionally well done and gives great credit to the artist in Canada, successfully displaying Colville’s story but also transporting us to a piece of Canada, one that we can’t see on a daily basis. Watch out Porter Airlines, your flight to NB and Halifax might start getting a little
bit more in demand!
The exhibit open to the public tomorrow and runs until January 3, 2015 at the Art Gallery of Ontario.
It’s that time of the year again: We are seeing back-to-school signs, we may have even experienced a break from the summer heat and you may have even found yourself eyeing boots in a storefront window. There is something unique to this change of season unlike others, it inspires those to take a fresh start, and that is a great thing. We all fall off the wagon in one way or another, and seasons are nature’s way of telling us this is normal, and we get a chance to change as well, starting off new. And so, while others are buying school books, uniform clothes and pencils crayons, why don’t we all join in and make some fall changes as well. Let it be going for a new promotion, starting a side business, cooking dinner more often for friends and family or signing up for something you’re passionate about. This is the time … what will you change?