by Guest on June 15, 2010
It is truly amazing how many people entrust their entire life savings to stockbrokers who know absolutely nothing or very little about investing. In their defense, many stockbrokers may be honest individuals who truly want to help their clients. However, the problem is that they were never trained to be investors but instead were trained to be salespeople, and they are constantly being pushed by their employers to sell. After being recruited by a brokerage company, they are subjected to intensive sales training where they are taught how to cold-call, prospect for clients, and counter various clients’ objections. The actual education on how to select and analyze particular investments is limited.
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While at a concert recently, I met a young woman who told me that she and her husband took a course a few years ago that taught them how to trade individual stocks.
She said, when she first heard about the training she almost didn’t take it, because the course was quite expensive, almost $9000. However, they decided to take it despite the cost, and she said they were able to recoup the cost of the course within one year of trading stocks.
She recommended that married couples should take the course together, so that both partners are on the same page. It is much more difficult if only one spouse understands what is going on.
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Guaranteed Investment Certificates (GICs), are a common savings vehicle used by Canadians. There are different types. Some are locked in for a specific period of time, while others are cashable at anytime.
GICs provide the following advantages:
-Your principal is guaranteed.
-For most GIC types, you are guaranteed a fixed rate of interest for a specific period of time.
-They help people to save who would otherwise spend their money. If their money is locked away, they have no way of accessing it, making it impossible to spend it on a whim.
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Inflation, the ever -increasing cost of everything over time, makes a significant impact on your savings. In a normal, healthy economy, the inflation rate usually hovers around 3%. Essentially, everything goes up in value except your money. This is an important concept to understand as inflation impacts your purchasing power.
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For those of you who consider yourself to be visual learners, you will enjoy watching some of the personal finance and investing videos on http://kanjoh.com/. It is a website that aims to provide “financial clarity above the noise”.
The goal of the website is to help people understand the economy, how to effectively save money, and to understand the various types and aspects of investing. I am impressed with the videos I have watched on the site so far, as they are straightforward, easy to follow, helpful, and interesting.
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by Pam on February 25, 2010
Withdrawing from an RRSP can be an extremely expensive option due to the tax consequences. So, unless you are saving for retirement within your RRSP, or you are planning on taking advantage of the Lifelong Learning Plan or the First Time Home Buyer’s Plan, I would not recommend saving within an RRSP investment vehicle.
To illustrate this, suppose you are 25 years old and you have managed to save $5000 in your RRSP. You end up spending too much money over Christmas and find it impossible to keep up with all your bills. You decide to withdraw $2000 from your RRSP.
By doing so, you have lost $2000 worth of RRSP contribution room. You can never get this contribution room back.
As well, you will be subject to a withholding tax of 10% in all provinces (except Quebec where you would have to pay 21%) that would be taken off the top and sent to the government. So, even though you are withdrawing $2000, you would only get $1800 at the end of the day or even less in Quebec.
You will also need to add the full $2000 to your income for the current tax year, and then depending on your income tax bracket, you will likely have to pay more tax at the end of the year unless you deliberately make an RRSP contribution to offset the withdrawal.
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by Pam on February 9, 2010
With the introduction of the Tax Free Savings Account (TFSA) in January 2009, Canadians now have another investment vehicle option to save for retirement. Whereas before, most people took advantage of the immediate tax deduction for contributing into a Registered Retirement Savings Plan (RRSP), now they have to consider what will be most beneficial to them in the long run. With the RRSP contribution deadline for 2009 fast approaching, it’s important for Canadians to make this decision ASAP.
What are the advantages of contributing to a TFSA?
Although you don’t receive an income tax deduction for contributing into a TFSA, there are some important advantages to consider. All earnings within a TFSA are not taxable, whereas with an RRSP, earnings are tax deferred, but when funds are withdrawn, they are fully taxable.
A second advantage is that there are no expensive tax implications when you withdraw from a TFSA. Since you’ve already paid tax on the money you contribute to a TFSA, when you withdraw the funds it is not a taxable event. By contrast, if you withdraw from an RRSP, not only are you subject to an immediate withholding tax, you also have to add the amount withdrawn to your income for the year and you may end up paying more tax when it is time to fill out your tax forms or prepare your online taxes this year.
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