EQ Bank Savings Plus Account

When to Put Money in RRSP

I have come up with a relatively straight forward heuristic on how to figure this one out.

heu·ris·tic adjective
enabling a person to discover or learn something for themselves.”a “hands-on” or interactive heuristic approach to learning”

Google Dictionary description

It is a simple trickle down or waterfall decision tree. Many times I get asked this question, or see it float by in other sites.

Personal Finance Waterfall

Where to Put Money Heuristic

  1. Pay off debt , it has the highest guaranteed pay back today.

    I mean all debt except perhaps your mortgage. A mortgage is your biggest debt, so my view is investing elsewhere, and not paying down your mortgage is a mistake. I have been told my opinion is very “old fashioned”.
    • This lowers your risk in life and gives you choices.
  2. Put money in your TFSA.

    My opinion is that this is a good place to put your money. How you invest it, is up to you. It should be within your Risk tolerances. Whether you want to buy stocks, Index Funds, ETFs or mutual funds is up to you. Do this in a trading account. In a trading account you can buy all those savings vehicles. In a Mutual Fund account, you usually can only buy Bank or Insurance company (read high MER) funds.

    TFSA until you reach your limit. You find that in your My CRA Account (limit as of start of current year).
  3. Do you have Kids? If you do, maybe it is time to think about an RESP? This could be, before (2). The Registered Education Savings Plan will help your child’s future. You may decide you don’t want to do this, so you could skip this step.
  4. Do you have a disabled loved one? Before step (1) you might want to think about an RDSP. A Registered Disability Savings Plan will help their future a great deal.
  5. Time to use your RRSP. It will lower your tax levels, so you should reinvest the money you get back into the RRSP, until you have no RRSP limit left.

    Sometimes you can’t use your RRSP, if you are lucky enough to have a Pension. This is a tragedy of riches, so don’t complain to your friends about it, or they might kick you in the shins.
  6. You have reached savings nirvana. If you are at this point where:
    • All your debt is paid off
    • Your TFSA limit is reached
    • Your RRSP is full
      You are now at the Zen level of life.

At this point in your life you have choices that most folks don’t have. Your Risk level should be quite low. Your stress level (due to money) should be non-existent.

This is your goal. Being out of debt, with money in the bank means you are financially in the right place. You can do what you want.

Am I Done ?

If you somehow get back into debt, restart the process. You did it once, you can do it again. Maybe create (say after step (1)) an Emergency Fund, in case something bad happens.

Is this easy? No, however, it is a good heuristic.

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I Like My Money Like I Like My Coffee

Safely invested, with low fee drag and growing every year.

Big Cajun Man 2020 (with respect to Letterkenny)
I Like My Money This Way

Frankly this makes as much sense as a lot of financial advice that I hear these days. At least the punch line is on point.

The Debt doesn’t matter crowd seems to think that due to low interest rates, debt is an afterthought. Unless the entire economy changes, Debt is going to comeback big time.

These days it is reminiscent of the hay days of the Internet Bubble. Back then the statement was:

Profits don’t matter. It’s eyeballs!

90’s Internet Bubble Investing Credo

That drove the 90’s Internet bubble. When you read that I am sure you smirked or laughed how insane that reads, but it was the gospel of investing in the 90’s. We saw the explosion of that bubble, and the associated side effects (i.e. loss in wealth for day to day investors).

One More

I like my women, like I like my coffee. Respected in the workplace and compensated at an equitable and fair level.

Big Cajun Man 2020

Same Topic

best advice

I wrote an article in 2005 about Experts? It’s your decision where Harry S. Dent Jr., back in 2000 advised how great the Internet was as an investment. This was written as the Bubble Exploded.

Index Investors, who purchase Canadian Indexes need to remember they are Highly Exposed on Banks. Banks hold a high portion of most major Canadian Indexes.

Key investment strategy

You need Two Key Investment Strategies, if you plan on investing for the long term. The first is easy, when to buy, but what might be the second?

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COVID19 Opening Up, Middle Aged Canada and #MoneyTalk

Slowly we attempt to return to a semblance of normalcy, in our new COVID19 dominated world. In Ottawa, most businesses are “open” but under strict rules about distancing and masks are to be used pretty much everywhere.

Don’t expect Interest rates to go up any time soon.

The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds.

Bank of Canada July 2020 Monetary Report

They are ready to react if Inflation occurs, but it sounds like they are not expecting that any time soon. Cheap credit continues on.

Not sure about the whole kerfuffle about wearing a mask. I wear it to protect my family and to protect the folks I interact with. Why folks are yelling at minimum wage employees of firms, is beyond understanding.

Can we nominate Dr. Fauci for President? Asking for a friend. Border being closed is good for Canada overall, but bad for tourism and those towns that rely on our American visitors.

On the topic of masking, my battle against unwanted email continues. I have not slain the dragon but it is wounded and my influx of spam has slowed.

The median age in Canada is 40.8 years old? I was not aware of that (the data is from July 2019). Seems like the country is not aging nor is it getting any younger.

There are more Seniors than Young Folk and it is only going to increase in the future.

Of those old folks most of them are Baby Boomers too. Stats Can’s definition of a Boomer is born between 1946 to 1965. That is interesting because for the longest time I wasn’t a boomer, but now I am included in them. I don’t know if that is a good thing or not?

Inflation (year over year May 2020) -0.4 %
Bank of Canada Overnight Rate July 17th 0.25%
Unemployment Rate (as of June 2020)12.3%
Real GDP By Expenditure (Q1 2020)(quarterly change)-2.1%
Population of Canada (Est April 1, 2020)37,971,020
CIBC current prime rate2.45%
BMO current prime rate2.45%
Scotiabank prime lending rate2.45%
TD prime lending rate2.45%
Tangerine prime lending rate2.45%
Some Useful Financial Data for Canadians as of July 17th

COVID19 Data Canada

Click here to find an up to date graphic from the Government of Canada

Total Cases109,264
Total Deaths8,827
Data as of July 15th 2020

Past Writings

Thanks to a bad tooth infection I have been distracted with other things. It is slowly being repaired, but I will hopefully have an implant to replace the missing teeth soon.


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The Economy Limps Forward

While businesses slowly reopen, can they survive in this environment? That remains to be seen. Real Estate, however, continues to defy logic, in terms of market elasticity.


Tweets of the Week

I have said, Don’t Click That, before, I guess some folks will do anything if a Celebrity tells them to on Twitter.


For those who thought that somehow the Financial Industry was an ethical place.


An interesting perspective from our friends in Reddit.


Random Thoughts from the Past

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RESP Only For the Rich ?

TL:DR : Rich folk are using RESPs much more than the poor, which is counter to whom it was supposed to help.

Stats Canada came out with a very telling survey titled, Why are Lower-income Parents Less Likely to Open an RESP Account? by Aneta Bonikowska and Marc Frenette. The findings are worrisome in that it points to the fact that the RESP seems to be a program mostly used by the rich(er) parents.

A telling quote from the Executive summary.

The results suggest that differences in wealth remain the single most important factor behind the gap in RESP participation by family income, even after accounting for differences in parental education and literacy, numeracy and financial literacy.

Why are Lower-income Parents Less Likely to Open an RESP Account? The Roles of Literacy, Education and Wealth

Many lower income families are unaware that even if the put no money into the program, it can grow with the Canada Learning Bond. This can add up to almost $2000 (over the life of the RESP).

The claim that this is a Financial Literacy issue is a bit of a stretch, but possible. I think it is that Lower Income families are not aware of the CLB and other benefits (which I suppose is Financial Literacy). My guess is tellers at banks will not offer to set up an RESP for a “No Star” customer. The Up Sell would be reserved for “good” customers.

A Graphic from Stats Canada Report about RESP and Lower Income Families
A Graphic from Stats Canada Report about RESP and Lower Income Families

Conclusion

I guess the question is simple, if Canadian Parents are barely making ends meet, will they put money aside for their kids’ post-secondary education? This report concludes, No.

I think I agree, but I’d really like to know how to change that.

Ways to Fix This?

  1. Banks need to market this program to lower income families, and point out that there is Free money to be had. The Canada Learning Bond is that free money. I really doubt many banks will do this, unless they could make money doing it.
  2. Expand the Canada Learning Bond, so that there is more money for lower income families.
  3. Maybe a Government run RESP program, that is set up for lower income families?

Read more about RESPs, Click Here! The page is being revamped, so come back soon.

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🇨🇦 Happy Canada Day! 🇨🇦

It is Canada’s Birthday, but it is an odd one with the COVID19 Pandemic going on. I live in Ottawa, but there are no outdoor celebrations here for the first time I can recall. Canada Day 2020 falling on a Wednesday makes for an odd work week as well. Is it two 2-day weeks? I 2-day week and a 5 day weekend? Chacun va choisir.

I continue to see the majority of folks I see “outside” not wearing masks, and many ignoring distancing as well. Let’s hope Canada does not follow the US model of simply assuming it is all OK and life has returned to normal ? I wear mine for everyone I love that I don’t want to infect, why aren’t you wearing one?

The new Ontario Math curriculum for Grades 1-8 is interesting. I think it is a good idea, but I am also a Math Graduate. The subject matter is fine, but they need to find more ways to make Math (and STEM in general) more inclusive. I would love to see program information on how the system teaches the subject. Far too many kids are “turned off” or “left out” on the subject, I want to see more fresh faces in the world of math. If you saw my graduating class in 1986 you would understand what I meant.

Evidently Financial Literacy is also being included in this program, which is important, but again, hopefully it will be taught in a way to be inclusive. Me standing in front of a bunch of 8 year olds teaching them about Bond Yields, would be less than ideal (as an example of how NOT to teach Financial Literacy).

I tip my cap to celebrate 100th Anniversary of the Negro Leagues #tipyourcap2020. The “Negro League” (apologies for using the historic term) was where segregated black players could play baseball before Jackie Robinson broke the ceiling and joined the Major Leagues (in Montreal).

My battle against unwanted email continues, it is manageable, but I am finding that many subscriptions seem to be like herpes, they never really go away.

An excellent Canadian Financial Quip is that Peter Jennings (a great Canadian Newsman), never purchased a new car (only used cars).

Inflation (year over year May 2020) -0.4 %
Bank of Canada Overnight Rate June 30th 0.25%
Unemployment Rate (as of May 2020)13.7%
GDP Growth (Q1 2020)-11.6%
Population of Canada (Jan 1, 2020)37.894 Million
CIBC current prime rate2.45%
BMO current prime rate2.45%
Scotiabank prime lending rate2.45%
TD prime lending rate2.45%
Tangerine prime lending rate2.45%
Some Useful Financial Data for Canadians as of June 19th

COVID19 Data Canada

Click here to find an up to date graphic from the Government of Canada

Total Cases103,918
Total Deaths8,566
Data as of June 30th 2020 AM

Past Writings

I seem to find my writing muse last week and there were a bunch of articles written. The backlog of stories, dropped, a little.

  • Not Asking is Rejection by Default is very true. I have written about this previously, but it is still very true. You need to stand up for your self (while not being rude or mean either (which is the Canadian way)).
  • MER : A Worm in the RESP Money Tree has been a theme I have written about many times. The Registered Education Savings Plan (RESP) is a shorter term savings plan, so a high Management Cost in your account is taking a big bite out of your growth.
  • Banking Malware Be Aware is from my technical blogging and security blog, but very financially relevant. Do not click on anything sent to you from anyone, without being positive it is what you think it is.
  • RDSP : Quick Points started out as my notes for an interview I did with Tom Drake on the Registered Disability Savings Plan. The interview link is there as well, and it went well.
  • A Guide to Understanding the Tax Considerations When Cashing out an RESP is a Guest Post (I must be getting soft in my old age) about withdrawing funds (the right way) from your child’s RESP.

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Celebrating Canada Financially

There may not be a lot of fireworks and celebrating together, but still some great Canadian financial perspectives on Financial Literacy, and money.

  • Will the Supreme Court Decision against Uber change the Gigg Economy? I don’t think as much as folks hope, but any movement towards making folks actual employees is a good thing. It is a fairly narrow decision, but maybe it is a small step forward.
  • The Globe had a round up article last week, that had a section on someone asking, “What to with an RESP for $500,000“? Kind of gives you a good perspective on who reads the Globe, don’t it?
  • For those unaware Kerry from Squawkfox (a friend of this site) has been in the battle of her life, read more about it here, This could save someone’s life
  • Michael James reviews yet another books for those who have issues dealing with money, Talk Money to Me, is a good book if you really do need help.
  • Mark from the Blunt Bean Counter sums up my current views about working at home nicely in, Working from Home – Get Me Out of Here! I must admit that I am getting a little house happy these days, as well.

Tweets of the Week

First, a great public health message from a person of whom I am not very fond.


I keep having deep thoughts these COVIDy days. The thoughts can’t be turned into an actual article, but they fit a tweet well.


I am really not sure of the validity of this set of tweets, however reading the entire set of them is not surprising, more is the pity.


Videos of the Week

Think you are an expert about Money Laundering now that you have watched Ozarks, Breaking Bad and Narcos? Not so quick there slick. A real professor does some fact checking on the topic. See, you did learn something from this site.


Random Thoughts from the Past

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