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It’s Financial Literacy Month: Set yourself up for success
Use these tips to build on your financial know-how.
Carissa Lucreziano, Vice President, Financial and Investment Advice
Nov 25 2020
7 minute read
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This November marks the tenth anniversary of Financial Literacy Month — and, this year, financial literacy is more important than ever.
The COVID-19 pandemic is the big story of 2020. A recent CIBC survey found that 40% of Canadians are worried about the effect of COVID-19 on their savings and retirement plans, with almost a quarter being unable to contribute to their retirement nest egg since the beginning of the pandemic Opens in a new window..
This year has taught us many lessons. The survey found that 20% of Canadians have learned that they need to pay more attention to personal finances, 21% learned not to panic when markets get volatile and 19% learned that it’s important to save for retirement and their future. Ultimately, Canadians have learned that financial literacy – understanding your finances and being comfortable managing them – matters, especially these days.
No matter your current level financial understanding, you can build on that knowledge and feel more confident managing your money going forward. Here are a few ways to help you get started.
If you’re a student or parent of a student
This school year has presented us with new challenges, but also new opportunities. Use these strategies to get organized:
Learn how to make and keep a budget
Students may be saving money as a result of reduced commuting and social interactions, and saving on day-to-day spending. On the flip-side, they may be running low on money due to a lack of part-time work available. With changes in cash-flow, it’s important to make and keep a budget, so they can keep track of their money. Try our student budget calculator Opens in a new window.. Take this one step further and put extra cash in a savings account or TFSA to work towards short-term goals.
Understand the ins and outs of credit cards
With changes in cash-flow, you may use your credit cards more. This is a good time to learn how credit cards work, and how using them impacts your credit score. To learn more, check out these credit card basics. You can also visit our dedicated Student Life site.
If you’re well-established in your career
Depending on the stage of your career or opportunities in your industry, you may find that your cash-flow has increased. If so, here are some tips to help you maximize on additional funds available to you:
Evaluate the opportunity to invest and save for the future
Consider investing your cash surplus to help reach your goals faster. Seek out what you want to know about investing and then determine the investments that are right for you. Check out the investing resources available at Growing Your Wealth. You can also speak to your advisor to determine an asset mix that suits your needs, timeline and risk tolerance.
Start or build your emergency savings fund
When unexpected events like job loss, or home or car repair occur, you can have peace-of-mind knowing you have some cash to cover it. When extra funds come your way, saving them for a rainy day can be a very smart move. It is generally recommended that this fund should equal 3 to 6 months of your net income.
Work with your advisor to maximize your investment plan
Additional cash-flow can be directed into savings vehicles like RRSPs, TFSAs, or RESPs for your long-term goals, whether it’s a lump sum or part of your regular investment plan. To learn more about how these savings vehicles can work in your favour, read Just do it: The case for tax-free investing (PDF, 205 KB) Opens in a new window..
If you’re retired or nearing retirement
Your retirement savings may have been impacted significantly by the recent market volatility and you may feel uncertain about how you’ll fund all of your retirement dreams going forward. This is the time to work through some decisions and make updates to your plan. The important thing to remember is that market fluctuations are a normal part of investing and you shouldn’t let emotions get the better of you. Here’s a few things to add to your financial to-do list:
Meet with your advisor and re-evaluate your financial plan regularly
They can help you identify any impacts to funding retirement, understand your retirement income relative to expenses and recommend solutions or ways to adjust the budget and timing of your goals.
Get the historical facts
By diversifying and staying invested for the long-term, you can make the most of your investments and help achieve your long-term goals. To learn more, read Time-tested strategies for long-term success (PDF, 920 KB) Opens in a new window..
Secure your estate plan
Now is a good time to evaluate your estate plan, as some things may have changed over the course of the year. Review your will, power of attorney, and guardians for children and make updates as needed. If you have yet to set these up, now is the time to begin. To find out more, check out Estate Plan Essentials.
This can be an exceptionally difficult time, as you’re not only adjusting to life in a new country, but also doing it during a pandemic. The following tips can help you and your family settle in and set up your financial wellbeing:
Establish a trusting relationship with an advisor
An advisor can help you set up all of the essentials for banking in Canada, which can include a debit card, credit card, chequing account and savings account. To learn more about each of these and what they do, visit New to Canada Opens in a new window..
Learn about income and expenses, and how to track them
Once you have the basic tools for banking in Canada, it’s good to understand where, exactly, the money comes from and where it goes. Using this information, you can build a budget and track your finances with ease. To learn more about budgeting, visit How to Manage Your Money and Make It Last Opens in a new window.. You can also reference our banking glossary for definitions of common banking terms Opens in a new window..
Find a place to call home
You may choose to rent a house or apartment and leave the repair jobs to the landlord. Or you may prefer to purchase your own home and design it however you like. Whatever path you choose, make the decision that’s right for you, your finances and your family. You can learn more about what’s involved in renting at Renting In Canada Opens a new window.. Thinking about buying? Check out Mortgages for Newcomers Opens in a new window..
Financial literacy concepts for everyone
No matter how you’re faring at the moment, the importance of financial literacy is clear. This is why everyone should keep these concepts in mind:
Take charge of your debt
Paying down debt should be a key part of your financial plan. To learn more about debt and how to know when you have too much, read Debt 101 — Understanding the basics. Then, for strategies on how to take charge of debt, check out Debt 201 — How to strengthen your financial situation.
Prepare for future unexpected events
This economic environment has taught us the value of being prepared for the unexpected. Establish an emergency fund to help you manage your finances through times when your cash-flow may be diminished.
Re-evaluate the goals in your financial plan
The market may have impacted your cash flow at this time, but it doesn’t have to significantly impact your long-term goals. Work with your advisor to evaluate the impacts to your financial plan and determine strategies to get things back on track.
Now is the time to take charge and own your finances: take some time to review financial literacy resources, like the ones above. You’ll feel more confident making educated decisions to set yourself and your family up for success — and we’re here to help you, every step of the way.
