Agenda • Introduction and quick quiz
• • • • • • • • • • • Benefits of financial literacy Budgeting Break Managing your expenses Credit and debt management Lunch Saving and investing Break Financial planning Protecting yourself Summary and wrap-up
What you • How to manage your spending will learn and prepare a realistic budget today • Ways to save • How to pay off debt • How to invest to make your money work for you • How to plan to reach your own financial goal
5% c) 10%
.The average current percentage of their income that Canadians save is: a) 5% b) 7.
000 c) $33. the average per capita debt of Canadians was: a) $13.000 b) $23.In 2005.000
How much money did Canadians lose to frauds and scams in 2007? a) $250 million b) $450 million c) $650 million
000 b) $20.000 to $23.000 to $28.000 to $15.000
.000 c) $25.The average student graduates with a total debt of: a) $10.
The percentage of Canadian youth whose parents are not expected to have any savings for education after high school is: a) 25% b) 35% c) 50%
Benefits of • Control your financial future being more • Achieve your life goals financially • Provide for yourself and your family literate • Be a smarter consumer
Parts of a • Income budget • Expenses • Difference between the two: surplus or deficit
Know what • Keep every receipt. car or home repairs. • Review bank and credit card statements. vacations). you spend • Record every expense in a notebook or electronic device. donations. • Do this for at least three months.
. • Total your expenses at the end of the month. • Make a list of irregular expenses (gifts.
Monthly expenses – Fixed expenses
Monthly expenses – Variable expenses
Net Difference between total monthly income surplus or and total monthly expenses = deficit Net surplus _______________ OR Net deficit _______________
• Consider whether you need to own a car and a home. saving • Negotiate better plans (banking fees and services.Areas for • Check your bills. cell phone).
. telephone. • Pack a lunch.
• Get errors corrected before it’s too late.Check • Spot mistakes and overcharges.
. interest and penalties. your bills • Pay less in late fees.
Negotiate Call each service provider and ask: better plans • Do I have the best plan for my needs? • How can I cut back my monthly bills? • Can I bundle services to save money? • Can I avoid interest or late payment penalties?
Reduce • What am I paying in monthly banking service charges? costs • How much am I paying for ATM fees? • Can I save by doing more banking online? • Am I eligible for a low-fee deal if I’m a student? • Can I get a reduced fee if I keep a minimum balance? • Can you suggest a better plan for me?
The Cost of Banking Guide
Compare • What am I paying for land line and phone cell phone? costs • How much do my long-distance calls cost? • Can I bundle services together to save? • Can I switch suppliers to save money? • Do I have a contract? When does it expire? • Have I called suppliers to ask how to cut costs?
50 per month
. save 10% • Combine 4 services. save 15% • Save 15% of $130 = $19.Bundling • You pay $25/month for home phone. save 5% • Combine 3 services. services $30 for cell phone. $35 for Internet and pays $40 for cable TV = $130 big-time • Example of bundling discounts: • Combine 2 services.
. • Cook one big dish on weekends and freeze. save on • Bring your lunch. • “Veg out” on meatless meals once a week or more. • Bring a list and don’t shop on an empty stomach. • Set a budget and stick to it. • Shop with a buddy at discount supermarkets and split quantities.How to • Eat breakfast at home. drinks and snacks 27 food (and coffee).
interest a car? and maintenance).ca. depreciation.carsharing. select For Consumers and click Money.ca.caa. • Check out Driving Costs brochure www. Credit and Debt • Check out Where can I find car sharing? www.ic.gc. select Public Affairs • Try the Lease or Buy Calculator www.ca. click City List
.Do you • Add up the real costs of ownership really need (gas. insurance.
• When your income covers only mortgage payments and taxes
.When • When you move frequently: owning a • It takes at least 5 years to make home it worthwhile. doesn’t make sense • If you have a very low down payment: • You’ll need mortgage default insurance. • You may have a higher interest rate.
.ca/ tools-and-calculators/rent-vs-buy/ default. maintenance.) into a savings account. • Can you afford to live on what’s left? • Could you afford higher costs for heating.ic. Credit and Debt • www. select For Consumers and click Money.Can you • Try it out: afford it? • Put the monthly costs of owning a home (mortgage. property taxes.ca.gc.getsmarteraboutmoney. taxes or insurance? • Use a Buy or Rent calculator: • www.
How to cut $100/month of spending
What is “We’ve all got a latte factor, regardless of our your latte income level.” – David Bach factor? • Designer coffees • Lunch in restaurants • Impulse buys • The latest, greatest [fill in the blank]
Questions • When does a want become a need? to ask • What motivates you to buy – yourself advertising, friends, trendy styles? • Does the urge to buy die the next day? • Do your purchases make you happier? • What “needs” are now collecting dust? • What can you learn to live without?
Reduce • Avoid trips to stores and shopping malls impulse and online buying sites. 35 buying • Pay cash or cheque for purchases. • Reduce available credit on your credit card. • Leave credit cards at home. • Sleep on it and see if you still want it the next day. • Take baby steps and cut costs by increments.
True or false?
.Paying your credit card bill just a couple of days after the due date won't affect your credit report.
True or false?
.All credit cards have the same grace period (also known as an interest-free period).
you will be charged interest only on the $100 left to pay.Last month. your credit card balance was zero. This month. your statement shows that you made a $500 purchase. If you pay off $400 by the due date. True or false?
” you don’t have to pay interest on the amount you’ve withdrawn as long as you pay your credit card bill in full by the due date on your statement. True or false?
.If you use your credit card to take money out as a “cash advance.
• You might not be able to get a lease on an apartment. etc. • Your bank may refuse to give you a loan.Q5: Without a good credit history… • Your bank may charge you higher interest rates on a personal loan for a car. house. • A and B only.
. • All of the above.
get a low-rate card. • Pay a few days before the due date. • Don’t make only the minimum payment.
. pay as much trouble as you can.How to • Pay the balance in full each month. • If you always carry a balance. stay out of • If you can’t pay it in full. • Transfer the balance to a line of credit with a lower rate.
fixed • Interest rate: 18% payments
.Minimum • Initial balance: $3.000 vs.
Don’t accept debt your first offer. • Pay back more and pay more often. • Borrow only what you can afford to pay back regularly and on time. managing • Compare interest rates. • Keep within your budget. • Additional payments mean you’ll pay it off sooner and pay less interest.Tips for • Shop around.
University Cost and Debt Calculator
if you request the report be sent to you by mail d) All of the above
.Getting a copy of your credit report is: a) A good way to check for identity theft b) The only way to know if your report is accurate c) Free of charge.
If you have applied for several credit cards or other forms of credit within a short period of time. this could have a negative impact on your credit score. True or false?
Which of the following does not affect your credit score? a) Your payment history – whether you have ever missed a debt payment b) Any collection of bankruptcy that has been recorded against you c) Your history of repaying informal loans from family or friends d) Any outstanding debts you have e) Your account history – how long you have had credit. and the type of credit you have
• You miss payments or due dates. • You borrow from one card to pay another. • You transfer balances every few months just before the introductory offer expires.
. • You’re near the credit limit on most of your cards. signals • You use credit or cash advances for your daily living expenses.Recognize • You use your credit cards as a necessity the danger instead of a convenience.
• Switch to less expensive credit cards. • Leave your credit card at home. • Avoid “buy now.Take • Use savings to pay off balances. pay later” offers. control of • Pay down your highest interest rate your debt debts first. • Call creditors to negotiate for lower rates. • Get a consolidation loan to make one low-interest payment.
. • Start automatic/online bill payment to stay on schedule.
Why save • Feel more secure and in control for the • Reduce stress and conflict future? • Spend with less guilt or fear • Afford major purchases • Pay off debt and avoid new debt • Retire comfortably
specific • Write down your goal and post it where you can see it every day.Make your • Set a dollar amount and deadline.
. goals • Break your goal into smaller goals.
.Savings • • • •
Set up an emergency fund. Make savings automatic. Pay yourself first. Grow your savings.
000 a month after tax: • Saving 5 per cent = $100 a month = $1.
.) or a raise? Save it. • If you earn $2. tax refunds. etc.Make your • Set up direct debits from your bank account savings or paycheque.400 a year.200 a year. automatic • 5% to 10% of your take-home pay. • Extra money (from gifts. • Saving 10 per cent = $200 a month = $2.
Compounding makes your money grow
Amy and Amy Amanda • Starts saving at age 20 • Puts $1.000 a year into her RRSP to age 64 • Total she saved: $35.000 Amanda: • Starts saving at age 30 • Puts $1.000 a year into her RRSP to age 34 • Total she saved: $15.000
700 • Amanda: $116.At age 65 • Amy: $141.100
5 years. At 12%.2 years. your money doubles in 4. At 14%. At 8%. your money doubles in 7. At 6%.
. your money doubles in 18 years. your money doubles in 12 years. At 10%. your money doubles in 6 years. your money doubles in 9 years.Rule of 72 • • • • • •
Risk and return
GICs.Four types of • Investments that pay interest investment (savings accounts.) • Direct investment in a business
. etc. etc. mutual funds that invest in stocks. art.) 61 • Shares in a company (stocks.) • Property (real estate. etc. CSBs. precious metals.
Savings Account Investor Tool
or at your workplace through payroll deduction • Canada Savings Bonds: • Cashable any time. where you bank or invest.Canada • Available from early October to Savings April 1 each year Bonds • Opt for regular or compound interest • Buy online. but no interest paid if cashed within first 3 months • Canada Premium Bonds: • Cashable only once a year but pay more
• You can also get cashable GICs. ranging from less than 1 month to 10 years. the higher the rate of interest. • Traditional GICs: principal and return are guaranteed. 64 • Generally. • “Market-linked” GICS: principal is guaranteed. more flexible but with lower rates.GICs • Your money is locked up for a period of time. so they fluctuate. the longer the term.
. but returns are linked to a stock market index.
. • No guarantee of income: you could lose your whole investment. you are partial owner of the company. • Traded on stock exchanges or over-the-counter markets. • Stocks have outperformed other investment options by a wide margin over periods of 10 years or more. 65 • Share prices and returns can be positive or negative.Stocks • Shares in a company.
Why invest • Professional management in mutual • Diversification: your money is spread over funds? several investments • Ease of access: you can generally sell any time • Readily available through most financial institutions
sell products.Questions to • What is your background. experience ask a and track record? 67 prospective • Is your firm registered with a securities financial commission or other formal body? adviser • What can you do for me? Provide advice only. help me build a financial plan? • What products do you sell? • How do you get paid? • How do you work with your clients? • Can you provide references?
. your risk tolerance. • Know your investment: is it right for you? • Know your adviser.The three • Know yourself: your investment goals knows and timeline.
Registered • Tax-Free Savings Accounts (TFSAs): tax plans earn income from investments without 69 paying taxes on the income • Registered Retirement Savings Plans (RRSPs): defer paying income tax until retirement • Registered Education Savings Plans (RESPs): shift the tax to a student • Registered Disability Savings Plans (RDSPs): shift the tax to someone with a disability
Budget and financial plan
How can a • Minimize your taxes financial plan • Cover insurance needs 72 help you? • Buy a home and pay off the mortgage quickly • Fund your children’s education • Optimize employee benefits and pensions • Save and plan for retirement • Fund long-term health issues • Care for elderly parents • Manage estate planning and how to transfer wealth in families
Identity theft • 4 million North Americans fell victim to statistics identity fraud • Average loss to identity fraud: $1.244 • Scholarship and loan scams: more than $100 million • Average loss from a scholarship or loan scam: $263
.086 • Average loss per phishing attack : $1.
Transfer of fund scam
Phishing emails and phony web pages
Items for sale over payment scam
Signs of • Offer considerable pay with few to no duties bogus • Promise payment of wages in cash 83 job ads • Contain no physical address or contact person • Require you to open a new bank account or accept company cheques to “test” a wire transfer service
• Keep your wallet or purse safe.
. • Don’t carry ID you don’t need (such as SIN). • Lock your household mailbox if possible.Protect • Don’t share personal information freely. yourself • Destroy documents with personal information.
Protect • Limit the number of credit cards you hold. • Keep computer firewalls and spyware up-to-date. • Delete emails that ask for personal information. 85 cont.
. • Make sure websites are secure before transmitting personal information. yourself. • Check your credit report once a year.
• Don’t give telemarketers cont. yourself. • Destroy old documents that contain identity information.Protect • Keep your computer passwords safe. it is! • Save paper bank records for at least a year. • Be skeptical – if an offer sounds too good to be true. personal information.
ca).equifax.transunion. • Notify Canada’s credit bureaus 87 (Equifax Canada at www.
.ca and TransUnion Canada at www.What to do • Contact your financial institution immediately. • Notify your local police as soon as you are aware of it.
• Use RRSPs and TFSAs to let your savings grow tax-free. we learned? • Save money by questioning your bills and reducing your “latte factor.• Keep track of your income and your expenses What have in a budget. • Set clear savings goals. • Secure your identity and avoid identity theft. • Pay all debts on time and in full. • Start an emergency fund. if possible.
.” • Pay yourself first with automatic savings. • Find a licensed financial adviser for long-term investment guidance. • Shop around for the best banking accounts.