Most Canadians say they ‘need to save more,’ but aren’t making it a priority

The vast majority (85 per cent) of Canadians agree that they ‘need to save more money’, but nearly two-thirds (64 per cent) are not making savings a priority, finds a new CIBC (CM:TSX) (CM:NYSE) poll. And, while most admit they could get by with less, few do, and many say ‘extra money’ is for ‘pleasure or enjoyment’.

“With consumer spending still strong and fueled by a long period of record low interest rates, the study shows that very few Canadians are making savings a priority, which is concerning as we head into the holiday spending season,” says David Nicholson, Vice-President, Imperial Service, CIBC. This is the time of year when many of us make room in our budget for spending on gifts, Black Friday and Cyber Monday sales and holiday parties, but don’t think twice about how little we’ve saved until regret kicks in with our New Year’s resolutions.”

Key poll findings:

  • 85 per cent of Canadians agree that they ‘need to save more money’
  • 64 per cent say they lack a detailed or regular savings plan, including 26 per cent who ‘don’t really save’ or ‘never save’ at all
  • 82 per cent admit they could ‘cut back’ each month by on average $360 ‘before feeling the pinch’
  • In addition to their regular income, nearly two-thirds (62 per cent) say they receive on average $2,280 in ‘extra money’ each year
  • 79 per cent of those aged 35-54 worry about not having enough money to retire when they want to
  • 53 per cent of Canadians say they’d use credit or borrow from friends and family if faced with unexpected $1,000expense
  • Top hurdles to saving are: not earning enough income (46 per cent), getting derailed by unexpected expenses (29 per cent), and struggling to pay everyday expenses (24 per cent)

“People think it’s too hard to save, but the truth is that we’ve just become rusty at saving. It’s about shifting your mindset, and getting into the habit of saving regularly,” says Mr. Nicholson. “The hard part is exercising self-control over your spending so that you can increase the amount you save over time.”

No more excuses

A majority of Canadians (82 per cent) admit they could spend, or get by with, less each month — on average $360 less — before feeling the pinch.

Further, almost two-thirds (62 per cent) receive ‘extra money’ each year — roughly $2,300 on average and as much as $13,100 in the form of cash gifts, employer bonuses, and tax refunds. But, less than half (44 per cent) will save the surplus funds, and two in five say the ‘extra money is for pleasure or enjoyment.’

Among those who receive extra cash throughout the year, most (66 per cent) use it to buy themselves gifts, pay everyday expenses, or to chip away at consumer debt. Only two in five (41 per cent) will put those extra funds aside for an emergency, or to boost retirement savings.

With interest rates expected to edge higher and people living longer in retirement, Canadians need to do more than simply spend less, says Mr. Nicholson.

“The real question is, how can you afford not to save? Every day that you delay starting a savings plan, the harder and more expensive it gets to meet your goals later on in life,” he says. “The sooner you start a savings plan the sooner your money can be put to work for you.”

‘Give to’ yourself first

The poll findings show that simple saving habits work best, with more than half (55 per cent) of Canadians agreeing they’d be more likely to save if a set sum went automatically off their pay and directly into a dedicated savings account.

“Paying yourself first is an easy and effective savings strategy,” says Mr. Nicholson. “For most people, it’s actually easier to start with a savings goal first, set an automatic savings plan to meet that goal, and then, simply spend what’s leftover.”

Having a budget and financial plan helps determine the right savings amount based on each of your short- and long-term goals and monthly cash flow. By setting up the withdrawal on payday, we remove the temptation to spend those dollars, rather than trying to overcome it, he adds.

Directing money into a Tax-Free Savings Account (TFSA) can give an added boost to your savings since the interest or investment income that’s earned will be tax-free, helping your money grow faster. Money in a TFSA can also be withdrawn without penalty and used for multiple short- or long-term savings goals, such as to buy a car, renovate your home, take a vacation, tap it for an emergency, or save it for retirement.

“Before you get ready for the first big shopping weekend of the season, think twice and put yourself at the top of the gift-giving list,” says Mr. Nicholson. “We automate our bill payments, why not automate our savings? It can help you get through the upcoming season confidently, and get your savings on track.”

5 hacks for fail-proof savings:

  1. Get into a savings mindset
  2. Set a goal
  3. Decide how much you can cut back
  4. Make it automatic and frequent
  5. Keep spending and credit in check

SOURCE CIBC

Liz Weston: 4 Steps to Disaster Proof Your Finances

By Liz Weston

THE ASSOCIATED PRESS

Mother Nature could be excused if she wondered, “How much more prompting do you people need?”

This year delivered epic wildfires, devastating hurricanes, massive floods and some pretty horrific earthquakes. Yet many people still haven’t taken a few critical steps to protect their financial lives from such disasters.

Consider setting aside a few hours this week to take care of these four essential tasks:

REVIEW (AND BOOST) YOUR INSURANCE

Most renters don’t have renters insurance, but they need it since their landlord’s policy won’t cover their stuff.

The vast majority of homeowners do have homeowners insurance, but often not enough especially if their policies haven’t been updated regularly to reflect rising construction costs or improvements. Ask your insurer to rerun the numbers to ensure you have enough coverage to rebuild your home completely. United Policyholders, an advocacy group for insurance customers, recommends adding as much “extended replacement cost” coverage as you can afford. This add-on boosts the policy’s coverage limits by 20 per cent to 100 per cent if costs run unexpectedly high, as often happens in disaster zones when rebuilding costs soar. Another smart addition: “building code upgrade” or “ordinance coverage” to pay the higher costs of rebuilding to current standards.

Other key points:

_Homeowners insurance typically doesn’t cover floods or earthquakes, so consider buying those policies if your home may be at risk.

_You want “replacement cost ” coverage for your home’s contents, not “actual cash value,” which will pay only pennies on the dollar to replace your stuff.

_You may need extra coverage if you have certain valuables, such as jewelry, collectibles, guns or computers and other home office equipment. Policies typically limit coverage to $1,500 to $2,500 for each of these categories.

_Opt for generous “loss of use” or “additional living expenses” coverage, since that will pay your rent and other costs while your home is uninhabitable. United Policyholders recommends having at least two years’ worth of additional living expense coverage.

If you’re concerned your coverage limits are too low and your insurer won’t let you upgrade, shop around for a better provider.

SCAN IMPORTANT DOCUMENTS INTO THE CLOUD

You may be away from home or not have time to grab your bug-out bag in your scramble out the door. Keeping documents or copies off site is one solution, but anything in your safe deposit box or lawyer’s office could be compromised by the same disaster that wrecks your home, says financial planner Leonard Wright, who evacuated his family from their San Diego-area home during the 2007 wildfires.

“You want it out of the area,” says Wright, a certified public accountant and personal financial specialist who contributed to a detailed disaster guide that the American Institute of CPAs created with the American Red Cross and National Endowment for Financial Education.

Wright uses DropBox, a file sharing and storage site, for family pictures and Box, a similar site known for its security features, for financial documents. Other cloud services include Microsoft’s OneDrive, Apple’s iCloud and Google Drive. Documents can be scanned with mobile apps or desktop scanners, which typically cost $200 to $400.

Disaster survivors say the following documents can be particularly important, according to United Policyholders:

_Insurance policies

_Passports and birth certificates

_Family photos

_Tax and loan documents

_Stocks and bonds

_Wills and trusts

_Home blueprints or surveys, if you have them

DO A QUICK HOME INVENTORY

This can be as simple as walking around your home, inside and out, recording your stuff with your smartphone’s video camera and storing that video in the cloud. Or you can use an app, such as Sortly, MyStuff2 or United Policyholders’ UPHelp Home Inventory to photograph and itemize your possessions.

ADD EMERGENCY ACCESS TO YOUR PASSWORDS

Security experts recommend using a password manager to securely store unique, hard-to-remember logins for each account while only having to remember one master password. Password managers also can help a trusted person to take over for you if you die or become incapacitated _ but that person needs access to the account. Some password managers let you offer emergency access to others. Another option is to keep copies of your passwords, or your master password, with your estate planning documents. Services such as Everplans and Fidelity Investments’ FidSafe offer online storage with secure sharing options.

Finally, make a note on your calendar to do all this again next year so all your important documents are kept up to date. Investing a few hours each year can pay off in an easier recovery if disaster ever strikes, and peace of mind even if it doesn’t.

_______

This column was provided to The Associated Press by the personal finance website NerdWallet .

One in three parents surveyed say their children will always ask them for money if they don’t develop healthy financial habits while young, TD survey finds

Read more

CCIR sights improved disclosure for segregated funds

The Canadian Council of Insurance Regulators (CCIR) published its Strategic Plan 2017-2020 on June 27 (link). The new plan outlines the priorities and initiatives of the CCIR for the next three years. However, consumer protection issues related to the sale of segregated funds—originally identified as a priority in 2014—remains a key objective for the CCIR for the foreseeable future.

The CCIR has engaged in a review to assess the regulatory framework of segregated funds to identify whether changes were necessary, particularly in light of recent regulatory reforms affecting similar investment products.

In May of 2016, the CCIR’s Segregated Funds Working Group published an issues paper for public consultation. With an emphasis on treating the customer fairly, the paper sought feedback on the potential for gaps in the current regulatory framework and the information required to ensure that customers receive helpful and meaningful disclosures.

Since the closing of the consultations on the issues paper, the CCIR has analyzed the input it has received and continued to work with key stakeholders on critical issues related to the segregated funds initiative. In the fall, the CCIR intends to publish a position paper outlining its recommendations and expectations.  The recommendations will refer to issues such as the delivery of the Fund Facts document for subsequent transactions, risk classification methodology, oversight of sales, needs-based analysis, updating of client records and know-your-product due diligence requirements.

The CCIR will also publish a prototype disclosure document, identifying minimum required information on performance as well as on fees and charges. The prototype disclosure document is expected to be released in winter 2018, following consumer opinion testing.

“Ensuring that customers have the information needed to understand not only how their segregated funds are performing, but also their full costs is of the utmost importance to us.” Anatol Monid, Chair of the Segregated Funds Working Group said.

The CCIR’s work in this area is expected to result in significant changes in the regulation of segregated funds; changes that are intended to ensure customers better understand the costs and performance of their segregated fund investments.

Further information on the segregated funds initiative is available on the CCIR’s website (www.ccir-ccrra.org).

About the CCIR:

The Canadian Council of Insurance Regulators is a national association of insurance regulators that traces its roots back to 1914. The mandate of the CCIR is to enhance insurance supervision and regulation to serve the public interest and to foster increased cooperative supervision and information sharing among regulatory authorities.

SOURCE Canadian Council of Insurance Regulators (CCIR) 

For further information: Media Contact: Malon Edwards (For English media ‐ Toronto), 416-590-7536; Sylvain Théberge (For Francophone media ‐ Montréal), 514-940‐2176, 1-877-525‐0337, extension 2341

5 steps you can take to help your aging parents manage their finances

5 steps you can take to help your aging parents manage their finances

Source: Marc Sherman and Jason Heath | FP

Here are five proactive steps you can take to help your parents manage their finances as they age:

  1. Consolidate accounts – If your parents have multiple bank and investment accounts, try to reduce the number of accounts and institutions. They will likely benefit from lower fees and a more integrated approach.
  1. Review statements – If they’re comfortable sharing their financial details, your parents might be able to set you up to receive copies of their statements. If their advisers are aware that you are looking over their shoulder, it adds an additional level of oversight. You can also look for signs of financial abuse, such as large transactions.
  1. Prepare a financial data organizer – Summarize accounts and advisers, details of any life insurance policies, if they have safety deposit boxes and where to find important legal documents and account passwords.
  1. Hire a financial planner – It could be helpful for your parents to know if they are likely to outlive their money. Conversely, it could be helpful for you to know if they may need some level of financial support. Strategically, a financial planner may be able to identify investment, tax or estate strategies to help preserve your parents’ wealth.
  1. Review their estate plan – It is important to ensure that wills, powers of attorney, personal directives, and similar documents are up-to-date before it is too late. Even if they are in good standing, it is also important to walk through what would actually happen with assets on death, based on beneficiary designations and joint ownership, as not all assets may pass through the estate and be addressed by a will. Proactive measures can also be taken to reduce income tax and probate fees that could be into the tens of thousands for even a modest estate.

Remember that just because someone is losing or has lost mental acuity, it does not mean that they cannot make or contribute to financial decisions. Even someone who has dementia can still express their wishes. So be sure to balance the risks of no oversight with the mistake of overstepping boundaries that are hard to establish when it comes to children getting involved in their parents’ finances.

What to know when shopping for financial advice in a sea of titles and credentials

By David Hodges

THE CANADIAN PRESS

TORONTO _ Choosing a financial adviser is a big decision, yet few investors realize that in most provinces there’s a lack of specific, harmonized regulation of professionals who provide that type of service.

An expert panel set up by the Ontario government has made several recommendations to deal with major concerns, including the myriad of confusing titles and credentials and the lack of an explicit obligation to act in a client’s best interest.

However, that hasn’t stopped investors from increasingly relying on financial advisory services.

A 2016 study by the Canadian Securities Administrators found that 56 per cent of respondents were working with an adviser, up from 43 per cent a decade earlier.

For those considering working with an adviser, experts recommend taking these steps before making a choice:

Check registration

Marian Passmore, director of policy for investor advocacy group FAIR Canada, says securities regulators will only register firms and individuals if they are properly qualified. So check an adviser’s registrations.

“A lot of people don’t do that,” Passmore says. “If they had done so, they may have not lost their money.”

A good place to start, says Passmore, is the CSA’s AreTheyRegistered.ca site, which allows you to search for any licensed investment adviser. Keep in mind, however, that insurance and financial planners won’t be on that site unless they’re also licensed investment advisers.

The CSA website also allows you to see if your licensed adviser has ever been disciplined for misconduct.

___

Ask about products and services offered

Not all advisers offer the same products and services and not all have the same expertise, so it’s important for consumers to understand the differences.

For instance, most investment advisers are licensed by either the Mutual Fund Dealers Association or the Investment Industry Regulatory Organization of Canada. But while most MFDA-licensed advisers deal only in mutual funds, IIROC advisers can also offer other products including stocks and exchange-traded funds.

In the case of financial planning services whether that’s to reduce taxes, save for a big purchase or to retire in comfort there are dozens of designations and investors will likely have a hard time distinguishing between them.

“IIROC has over 30 credentials that people have but that doesn’t really tell you how difficult or onerous those credentials are,” says Passmore.

The certified planner certification is a reputable designation for those who want a combination of sound investment advice and financial planning know-how, says Ken Kivenko, an investor advocate who is also chairman of the Small Investor Protection Association’s advisory committee.

“They can go beyond the straight investing phase,” Kivenko says. “They do holistic plans.”

___

Assess the cost of advice

Because advisers can be paid by salary, commission, a flat fee or a combination of methods, it’s important to make sure you understand how your adviser is paid, how much their services will cost, and how this may affect the advice you’re given.

For instance, many advisers are paid a commission for every product they sell, which may influence an adviser to recommend one investment over another, according to the CSA.

But keeping fees and other investment-related costs low has been proven to be one of the best and easiest ways to help your savings grow.

A fund with low fees, such as indexed mutual funds and exchange-traded funds, has an automatic head start over higher-cost rivals for returns and compounded over years the advantage can grow even more powerful.

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