As we near the end of Financial Literacy Month, it's a good time to remind us all that financial literacy is something that should be an ongoing journey of learning and practice. Taking charge of one's financial future is a continual process, not a one-and-done task.
Financial literacy is something that needs to begin at an early age to ensure a strong foundation. This will help kids make smart decisions and achieve their long-term goals -- even before they know what those goals might be! Arming kids with rudimentary financial knowledge, skills and confidence is a good way to ensure a financially savvy adult population, which benefits us all as a society.
Raising two daughters, I know how important those lessons were to instill and I'm now seeing how that's paid off. One of my daughters is now self-employed. Like any entrepreneur, she needs financial discipline to be able to manage her business affairs -- especially when it comes to issues like income tax and GST. My other daughter is still in school, but has always been financially responsible and has held jobs while continuing her studies to support her expenses.
It's never too late - or too early - to learn how to take your financial matters into your own hands.
Starting financial education early is ideal; it's also the key to building understanding that will grow with age. With recent calls to add financial literacy courses to high school curriculums, we may soon see financial education being taught more formally to teenagers, which would be a welcome initiative. However, it's never too late -- or too early -- to learn how to take your financial matters into your own hands.
Here are some tried and tested financial planning tips for every age:
In your 20s:
Set a budget! Write down everything you spend in a month, and organize your expenses into '"musts" and and "nice to haves." Subtract the musts from your income to know how much you have for nice to haves. Then cut back on the nice to haves to save -- for example, try eating out only once a week instead of twice.
In your 30s and 40s:
Try the "pay yourself first" approach. Start a great habit by setting aside a small amount for savings before you pay your monthly bills.
Set a budget and review it on a regular basis. As extra money comes in -- from bonuses or salary increases -- see where you can increase your savings in RRSPs, TFSAs or RESPs.
Make RRSP savings a priority and maximize your contribution room!
In your 50s and 60s:
If you pay off a loan or mortgage, increase your monthly savings. Ensure you have the right mix of investments to help build your savings within your timeline.
Sit down with a financial planner to explore your options and ensure you can support your retirement lifestyle.
To help promote earlier learning, RBC teamed up with WE (formerly Free The Children) to offer a financial education curriculum resource to Canadian schools. The program is called It All Adds Up and provides teachers the tools needed to help students learn about managing their personal finances.
The practical, hands-on lessons cover a wide variety of topics including money basics, needs versus wants, and how to save and spend in a cashless society.
Check out the Financial Consumer Agency of Canada for more tips.
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It might seem like obvious advice but how many of us actually manage to keep track of our spending (be honest!)? Keeping a record of all your incomings and outgoings is the essential first step when it comes to regaining control of your money, and it will instantly show you where you can make cutbacks. The Money Advice Service offers an online budget planner, which makes things a little less overwhelming.
If you’re fortunate enough to have a nest egg tucked away it’s all too easy to rest on your laurels and let them do their own thing. “Make sure you're getting the best interest rate on your savings,” advises the Citizen’s Advice Bureau. “Read any terms and conditions carefully to make sure they're what you are looking for. If you're not sure about anything, ask the savings provider or get independent financial advice.”
“Look carefully at your spending and see if there is anything you're able to cut down on. For example, you could shop around for a cheaper gas or electricity provider,” says the Money Advice Service. The organisation advises using an online calculator to help work out whether you can save by having a water meter installed. Sites like Consumer Council for Water or uSwitch will help you make an informed decision. Similarly for energy bills, try the Energy Saving Trust.
New mortgage deals are coming on the market all the time, and you should try to keep a regular eye out for the best deals around if you’re not locked into a fixed period. The Money Advice Service recommends that at the very least you review your mortgage when interest rates change, because this will affect how competitive your current deal is. Also try to shop around for deals once a year if you’re not tied into a mortgage that enforces early repayment penalties.
If you can train yourself to be more self-aware as a shopper, it can do wonders for your pocket. Comparing prices and shopping online could save you hundreds of pounds every year on everything from groceries to clothes and electrical goods. The Money Advice Service recommends My Supermarket for checking out the best deals, as well as sites like Google Shopping and Kelkoo http://www.kelkoo.co.uk/. Money Saving Expert offers plenty of handy recommendations – from being savvy to supermarkets’ subliminal selling tactics to learning the beauty of brand ‘downshifting’.
”You may find it helpful to set up standing orders and direct debits to pay your bills”, suggest the Citizen’s Advice Bureau. “Arrange for payments to leave your account soon after your pay date. If you can, try and save some money each month as a general savings plan or to cover emergencies when they arise.”
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