Friday, November 5, 2021 / by Mario Daniel Sconza
Financial Friday #86: 19 Valuable Financial Facts in Under 2 Minutes!
November is Financial Literacy Month and we are kicking it off with 19 fast financial facts to get you up to speed in under 2 minutes!
Paying the minimum required on a credit card will get you nowhere. If you need proof, get your statement and look for the “Time to Pay” section.
A 2.5% Management Expense Ratio (MER) fee on a mutual fund can decimate your retirement nest egg. The proof is here.
Since 1988, The TSX has been in the red 10 times on an annual basis. The worst drop was 35% in 2008, with the biggest gain being 31% a year later in 2009. The index was 3160 in 1988 and is currently over 21,000.
Requesting your own credit report or checking your score does not reduce your credit score.
Packing a lunch and passing on a daily take-out coffee or bottled water are the two most suggested ways to save money for good reason - they are relatively painless and can put over $3000 back in your jeans.
The top interest rates on cash in the bank are around 1.35%. You will make $675 in interest if you have $50,000 sitting in cash for a year.
Inflation is currently over 4%, double the government’s target rate and expected to remain high for at least a year. Keep in mind that raising interest rates is the government’s usual response to battle inflation.
Contributions to a Tax-Free Savings Account (TFSA) are not tax deductible, but any funds you deposit along with any investment gains are tax-free when you withdraw them.
The maximum CPP you can receive is around $1200/month, but the average is less than $700. You must max out the annual contribution (currently around $3200/year) for around 35 years to get the full benefit.
Canadian households saved an average of $5816 in 2020. Canadian savings rates have skyrocketed during the pandemic and are currently around 14%. They were well under 3% for many years prior to the pandemic.
A Registered Education Savings Plan guarantees matching grants of 20%. If you put in the maximum annual contribution of $2500, the government will add an additional $500 to the account.
The average new mortgage these days (Q2 of 2021) is $410,000 - 60% higher than the same period just one year earlier.
RRSP contributions are tax deductible. You can put up to 18% of your income in an RRSP and reduce your taxes, but you will pay tax on that money when you withdraw it from your RRSP.
The average Canadian owes the bank $73,500 with the average non-mortgage debt around $23,000.
Fifty-seven percent of adult Canadians do not have a will.
New cars depreciate at much faster rates than used cars. Most cars drop 20%-30% in year one, and 50% in the first 5 years. A shiny new BMW 7 Series or Mercedes S-class could lose up to 70% of its value in 5 years while a Toyota Tacoma will drop only around 30% over the same period.
Studies find that credit cards can double your total spending and lead you to pay a higher price for a given item, whether due to psychological reasons or simply to rack up reward points.
Maxing out your TFSA (currently $6000 year) from age 30 to 65 in an index fund at 5% will give you over half a million dollars on retirement day.
Half of Canadians live paycheque-to-paycheque and studies show this includes many high-income earners addicted to excessive spending.
An amazing pile of financial resources all in one place
You paid for it, so why not use it? The Government of Canada's Financial Literacy Month website is a treasure trove of really useful resources. Click on one of the "Key consumer building blocks" like "Managing Expenses" and get information, tools, calculators and lots of great tips. You could spend hours in here!
Bank of Canada says get ready for higher prices and higher interest rates
According to their latest news release this week, the BOC says inflation will be well above their 2% target for a couple of years and interest rates may be going up a lot sooner than expected.
It ain't over yet - how is your 2021 financial checklist looking?
There are still a couple of months left in the year to knock-off the last few items on this great list of 7 targets that everyone should be aiming for.
Browse your way to free stuff!
The Surf app pays you every time you're on the web - it's like a points card for internet browsing. The browser extension piles up reward points you can redeem at all kinds of places like Amazon and Uber eats... and you don't notice a thing!
How to get ahead financially while renting
Approximately 75% of Canadians who would like to buy a house simply can't afford it, so it's time to move on and leverage the benefits of renting vs buying.