Personal Finance For Canadians For Dummies

Eric Tyson, Tony Martin

• Publisher: For Dummies
• Year: 2018
• Print ISBN:
  9781119522799
• eBook ISBN:
  9781119522829
• Edition: 6
• Topic: Crescita personale
• Subtopic: Finanza a livello personale

This guide offers a comprehensive roadmap to financial security. Written by expert authors Eric Tyson and Tony Martin, it offers pointers on how you can eliminate debt and rein in spending, along with helpful tips on how to reduce taxes and save more.

The guide also offers a primer on investing, showing how you can build your wealth to ensure a comfortable retirement and university or college for the kids. With up-to-date Canadian examples and references, Personal Finance For Canadians For Dummies arms you with the tools you need to take control of your financial life.

Part 1

Getting Started with Personal Finance

IN THIS PART …

Understand your financial literacy.

Assess your current personal financial health.

Determine where your money is going.

Set and accomplish personal and financial goals.

Chapter 1

Improving Your Financial Literacy

IN THIS CHAPTER

Looking at what your parents and others taught you about money

Questioning reliability and objectivity

Overcoming real and imagined barriers to financial success

In recent years, a continuing stream of studies has indicated that Canadians are, by and large, financially illiterate. Study after study shows that we get a failing grade when it comes to financial literacy.

We know from our many years of work as personal financial teachers, writers, and commentators that many folks do, indeed, have significant gaps in their personal financial knowledge. Though more folks have greater access today to more information than in prior generations, the financial world has grown more complicated, and there are more choices, and pitfalls, than ever before.

Unfortunately, most Canadians don’t know how to manage their personal finances because they were never taught how to do so. Their parents may have avoided discussing money in front of them, and most high schools, universities, and colleges lack courses that teach this vital, lifelong-needed skill.

Some people are fortunate enough to learn the financial keys to success at home, from knowledgeable friends, and from the best expert-written books like this one. Others either never discover important personal finance concepts, or they learn them the hard way — by making lots of costly mistakes. People who lack knowledge make more mistakes, and the more financial errors you commit, the more money passes through your hands and out of your life. In addition to the enormous financial costs, you experience the emotional toll of not feeling in control of your finances. Increased stress and anxiety go hand in hand with not mastering your money.

This chapter examines where people learn about finances and helps you decide whether your current knowledge is helping you or holding you back. You can find out how to improve your financial literacy and take responsibility for your finances, putting you in charge and reducing your anxiety about money. After all, you have more important things to worry about, like what’s for dinner.

Talking Money at Home

We were both fortunate — our parents instilled in us the importance of personal financial management. Our moms and dads taught us a lot of things that have been invaluable throughout our lives, and among those things were sound principles for earning, spending, and saving money. Our parents had to know how to do these things, because they were raising large families on (usually) one modest income. They knew the importance of making the most of what you have and of passing that vital skill on to your kids.

In many families, money is a taboo subject — parents don’t level with their kids about the limitations, realities, and details of their budgets. Some parents we talk with believe that dealing with money is an adult issue and that children should be insulated from it so they can enjoy being kids. In many families, kids hear about money only when disagreements and financial crises bubble to the surface. Thus begins the harmful cycle of children having negative associations with money and financial management.

In other cases, parents with the best of intentions pass on their bad money-management habits. You may have learned from a parent, for example, to buy things to cheer yourself up. Or you may have witnessed a family member maniacally chasing get-rich-quick business and investment ideas. Now, we’re not saying that you shouldn’t listen to your parents. But in the area of personal finance, as in any other area, poor family advice and modeling can be problematic.

Think about where your parents learned about money management and then consider whether they had the time, energy, or inclination to research choices before making their decisions. For example, if they didn’t do enough research or had faulty information, your parents may mistakenly have thought that banks were the best places for investing money or that buying stocks was like going to Las Vegas. (You can find the best places to invest your money in Part 3 of this book.)

In still other cases, the parents have the right approach, but the kids do the opposite out of rebellion. For example, if your parents spent money carefully and thoughtfully and often made you feel denied, you may tend to do the opposite, buying yourself gifts the moment any extra money comes your way.

Although you can’t change what the educational system and your parents did or didn’t teach you about personal finances, you now have the ability to find out what you need to know to manage your finances.

If you have children of your own, don’t underestimate their potential or send them out into the world without the skills they need to be productive and happy adults. Buy them some good financial books when they head off to university or begin their first job.

PERSONAL FINANCE AT SCHOOL

In schools, the main problem with personal finance education is the lack of classes, not that kids already know the information or that the skills are too complex for children to understand.

Nancy Donovan teaches personal finance to her fifth-grade math class as a way to illustrate how math can be used in the real world. “Students choose a career, find jobs, and figure out what their taxes and take-home paycheques will be. They also have to rent apartments and figure out a monthly budget,” says Donovan. “Students like it, and parents have commented to me how surprised they are by how much financial knowledge their kids can handle.” Donovan also has her students invest $10,000 (play money) and then track their investments’ performance.

Urging schools to teach the basics of personal finance is just common sense. Children need to be taught how to manage a household budget, the importance of saving money for future goals, and the consequences of overspending. Unfortunately, few schools offer classes like Donovan’s. In most cases, the financial basics aren’t taught at all.

In the minority of schools that do offer a course remotely related to personal finance, the class is typically in economics (and an elective at that...

Table of contents

• Cover
• Table of Contents
• Introduction
• Part 1: Getting Started with Personal Finance
• Part 2: Spending Less, Saving More
• Part 3: Building Wealth through Investing
• Part 4: Insurance: Protecting What You Have
• Part 5: Where to Go for More Help
• Part 6: The Part of Tens
• Glossary
• Index
• About the Authors
• Connect with Dummies
• End User License Agreement