Fidelity Connects: Invest in the future with FHSAs

Robin Taub, CPA, CA, bestselling author, and keynote speaker.

Wednesday, April 5th, 2023

What do you hear about Canadians who are young? Do they want to buy a house?
• There’s this question about whether it’s even a possibility.
o The average price of a house in Canada is upwards of $660,000, which is
seven times greater than the average annual household disposable income.
o It has doubled over the last 20 years and is even higher in Ontario and BC.
o It depends because some younger individuals want the security and
permanency of a house whereas others may value adventure and they’re at a
state in their lives where they want flexibility and just want to live in an
apartment.
o The first home savings account is tax free on both the way in and the way out.
It combines the best features of a TFSA and RRSP.
 You can contribute up to $8,000 a year, that tax is deductible like an
RRSP. When you take money out, it’s tax free like a TFSA.

We have a few different ways to save for a home. On balance, is it going to make a dent?
• This new account is limited to $40,000, if the average price of a home is almost
$670,000, you’re taking a good dent out.
• There have been some discussions on reddit regarding the relevancy of this account
and if it will actually work.
o One of the tips was to try maxing out on your FHSA and then you’ll still have
your TFSA which although you won’t get that tax deduction on the way in, its
tax free on the way out and you can put that towards a down payment.
o There’s still the homebuyers plan which allows you to take money out of your
RRSP, but you have to repay that.

Let’s go into the discussion of pillars and values, where do you see students and former
students in their early 20’s when it comes to their finances?
• It’s hard for individuals to balance their finances because we are in a period of high
interest rates and high inflation.
o I like to tell parents who are trying to teach their kids about finances to focus
on these five pillars of money: earn, save, spend, share, and invest.
 o A lot of students are not really in the earning stage yet and are focusing more
on spending/paying for school and coming out with as little dept as possible.

How do you sit down with the parent and child and sort out where they want to go?
• These five pillars are still relevant for ages five and six if you share information within
each of the five that are age appropriate.
• As your kids get older, specific topics and examples are going to become more
sophisticated. I encourage parents to start early so that their kids can start developing
good habits young and make mistakes when the stakes are low.
• As they get older, they may find they need more help with money talk. I think
reaching out to an advisor will be a great source of information.
• I encourage parents to talk to their kids about what they do for a living, its important
to share what kind of education you need to be able to do a job and how much it
pays.

If your kid receives money for a holiday or gift at say 12 years old, how do you bring saving
up?
• 12-year-old kids are going to want to spend and as parents, I think that we want to
encourage our kids to delay gratification and to set goals.
• If your kid has an allowance every week, they can put some into a multi-sided piggy
bank or a youth account and save towards something that’s important to them.

How do you teach kids how to spend?

• If your kid is with you when you’re shopping at a grocery store or a corner store, this
is a great opportunity to talk to them about how much things cost, comparison
shopping, value, and how you are paying.
o You can introduce the idea of a debit and credit card to your kids.

For a young Canadian, sharing might be hard to do if they’re paying loans and trying to pay
for rent and food. How does “share” come into the overall picture?
• Sharing doesn’t just have to be with money. Students in elementary and middle
schools are participating in fundraising projects and volunteering. It could be money,
but the overall idea is giving back and putting things into perspective.
o It’s important to teach your kids to appreciate what they have and to be
compassionate and while doing so, you’re combating an attitude of
entitlement.
Do you see any trends among young adults moving away from the big city in order to afford
a home?
• Yes, and I think that was really accelerated during covid. I think that people were
exploring smaller communities where the cost of living has been generally lower.
• I think because covid had everyone working remotely, the housing prices in the
smaller communities were also increasing and I’ve heard stories of locals having to
move further afield because it became so expensive to live and work there.
o I think individuals need to do their homework but also consider their lifestyle,
city people may not enjoy moving to a smaller community.

Rent has been consistently high, what would you suggest to advisors, clients, parents, and
kids who may want to put money away to save for a house but are struggling with their
current rent?
• You have to understand the numbers and do your budget. You have to have a good
idea of what’s coming in and how much do you have after tax to spend on housing.
o Rule of thumb on housing was originally 30% of gross income should be spent
on housing. Recently, this has grown to 30%-50% and you still need money for
utilities.
o While stuck at home during the pandemic, we were subscribing to a lot of
different services, so I recommend doing a subscription audit.

What other trends are going on with young individuals and their spending?
• During the pandemic, individuals were saving on commuting, food, drinks, and other
extra expenses. Now that things have moved back in office, they are seeing all of
these expenses again and need to review their budgets and track their spending.
• If purchasing a home is really important to an individual, they should prioritize this
FHSA contribution rather than spending their income on lunches and coffees.

Can you transfer money from your RRSP to fund the FHSA?
• You can take money out of your RRSP or house for the homebuyer’s plan and then
you’ll have to repay it over time.
o I don’t believe that you withdraw it in order to contribute it to this FHSA. I
believe that has to be done with fresh cash.

Can the FHSA be used by seniors?

• Anyone from 18 to 71 can use the account so yes, seniors 71 and under can do it.
 • The CRA describes it as a “qualifying house”. You and your spouse or partner couldn’t
have owned a house in the last four years.
o It doesn’t have to be your first house ever. You could be renting, or you
might’ve had a house and for whatever reason are now renting.
• If you don’t end up buying the home, you can withdraw it and put it into your RRSP if
you have contribution room.

What would you say to people who are involved in finance but still need to be very wary of
scams?
• You have to be aware of the latest scams and should be skeptical of phishing texts,
emails, and calls.
o There have been a number of grandparent scams where someone will call a
senior and tell them that their grandchild has been in an accident and needs
money.
 Ignore the urgency in these scams and take the time to call your
grandchild or whomever and sort it out.

They used to teach home economics; how much is financial literacy in schools?
• There’s a misconception that it is not being taught in schools when it really is.
o All provinces and territories offer both elective and mandatory courses, I have
created a heat map that displays these classes across the country and posted
it on my LinkedIn.
o Home economics has been integrated into the curriculum through different
courses such as math, economics, and careers.
 Kid’s will learn about it in school but its important to reinforce the idea
and be a good financial role model.
o Apart of being a good advisor is understanding what’s going on in your
clients lives. Asking about their kids and getting to know if they are confident
around money.