Ask the Experts – July 2020
For many reasons, talking about money is something that people don’t do very often. Some people feel like it’s impolite to do so. Others feel like it’s a topic that is only appropriate with very close family and friends. There are also a lot of people who don’t discuss money because they’re worried about making a mistake or saying the wrong thing. Unfortunately, when you don’t talk about money, you deprive yourself of opportunities to learn new things and develop new strategies.
Talking about money allows you to understand finances better, which helps you make better decisions and come up with more effective plans for the future.
That’s why, every month, our financial team answers questions on money, budgets, and finances.
The questions here have been condensed or rewritten for clarity and simplicity.
I’m Worried About Losing My Job, How Can I Prepare?
These truly are unprecedented times, both in terms of the global health situation as well as its affect on the economy. The unemployment rate in Canada (and in many other countries) has risen a great deal, and the situation is very uncertain, so it’s understandable to be worried about your job.
However, if you are still employed right now, there are things you can do to help prepare and ease your stress. The first thing you can do is make sure you have an adequate emergency fund. If you do lose your job, having some money saved for emergencies can help you afford your expenses until you find new work. While the amount you should be aside for emergencies will depend on several factors, you may want to try to save six months of expenses if possible. While some experts say that 2-3 months of expenses is enough, because these are difficult times for the economy, it may take longer to find a new job. This means a few extra months of savings can really help.
If you don’t have an emergency fund right now or you do not have a very large one, do not panic. Saving several months of expenses takes time, so you have to build up your fund slowly. Start by looking at your budget and cutting your spending. Any money that you can avoid spending now can be put towards your savings.
Another important thing to do to prepare for a potential job loss is to try to avoid debt and try to pay down your debt, if possible. Ideally, you will want to divide your efforts between debt repayment and saving for emergencies. The reason why you’ll want to pay off as much debt as possible at this point is because you may not be able to make payments if you lose your job, and you don’t want to end up missing payments or getting stuck with large interest charges.
What Are Some Ways I Can Help My Child Afford College?
A lot of this will depend on the age of your child. If your child is still years away from postsecondary education, then investing in an RESP (Registered Education Savings Plan) is a great idea. If you don’t have an RESP for your child already, talk to your financial institution about setting one up.
Investing in an RESP doesn’t just let your money grow over time (though it certainly does that), but it also lets you take advantage of the Canada Education Savings Grant (CESG). This is a federal government program that can top up your annual RESP contributions by 20%. This grant is available until the end of the calendar year when your child turns 17. Through it, the government will match your savings by 20%, up to a maximum of $500 per year.
If your child is close to attending college or university, you can help them by assisting them with student loan applications as well as helping them find grants and scholarships. Unlike loans, grants and scholarships don’t need to be repaid. There are many different scholarships and grants available, so spend some time looking through your options and applying. Depending on your situation, you may find several options that could make paying for school more manageable.