docs/fiscal_knowledge.md

FISCAL Knowledge Base

Canadian banking, personal finance, and investment reference.

FISCAL CONTEXT INTELLIGENCE LAYER

Generated on: 2026-06-30T15:37:03.165Z

1. RBC ECONOMICS CONSUMER SPENDING TRACKER

• May spending snapshot: The pace of RBC Canadian cardholder spending outside of purchases at the pumps and autos moderated in May from the previous month, but remained positive.
• Our estimate of RBC’s core retail sales (excluding purchases of gasoline and autos) eased to 0.7% from 1.2% in April on a three-month average.
• Higher gasoline prices continued to absorb a larger share of household budgets. However, limited pullback in spending by consumers on other goods and services implies households continue, for now, to dip into savings (or increase borrowing) to keep spending.
• Essentials’ spending growth excluding gasoline moderated to 0.1%, but discretionary goods spending (ex-gasoline) continued to strengthen, suggesting consumers remain selective.
• Essentials’ spending increased 1.1% in May and remained up 1.3% on a three-month average, but largely reflected price increases in spending on gasoline. Growth excluding gasoline purchases was essentially flat, suggesting elevated fuel costs may constraining household budgets for other everyday necessities.
• Still, discretionary goods spending rose 1%, while the three-month average increased 0.7%, extending a steady improvement from near-flat readings earlier this year.
• Clothing, shoes and related apparel remained a notable source of strength with spending rising 1.8%, and maintaining a 1% three-month average gain.
• A 0.6% three-month average increase in household and construction-related purchases aligns with some evidence of stabilization in housing activity. It supports our view that while activity remains largely flat, some green shoots are beginning to appear in housing markets.
• Discretionary services spending rose 0.3%, and held at a 0.5% three-month average. Dining and entertainment spending softened in May, but both remained on a positive trend.
• Travel spending continued to lag other spending categories with the three-month average remaining negative at – 2%, suggesting households remain selective with larger discretionary purchases.
• Abbey Xu is an economist at RBC. She is a member of the macroeconomic analysis group, focusing on macroeconomic forecasting models and providing timely analysis and updates on economic trends.
• Rachel Battaglia is an economist at RBC, providing forecasts for the Canadian provincial economies and analyzing key trends in housing and consumer spending.
• RBC’s consumer spending tracking report uses RBC Data & Analytics’ proprietary database of anonymized card transactions by Canadian clients. The data are an accounting of merchant transactions that are divided into various spending categories covering tens of millions of weekly card transactions worth billions of dollars each week. Transactions, both in person and online, are classified into 11 broad spending groups: Dining, Education, Finances, Groceries, Health, Household, Shopping, Transport, Travel, Utilities, and Other. Within each group, the data are further classified: for example, shopping covers merchants classified as clothing stores, hobby shops, electronics stores, and jewelers, among others. We exclude purely financial transactions such as cash advances and insurance from spending.
• We examined changes in the value of all transactions in these areas using a 7 day rolling sample starting January 1st of each year that is indexed to pre-covid levels which are calculated as the average spending for the month of February 2020. To examine the impact of seasonal factors, we also show each’s year spending profile which depicts monthly trends in spending. Online spending volumes are estimated based on the presence of an RBC card at the time of the authorization.
• Protecting your privacy and safeguarding your personal information is a cornerstone of our organizational ethics and values and will always be one of our highest priorities. The underlying data for this analysis was aggregated based on transaction date, region and merchant category, and cannot be used to identify any individual client or merchant. For additional information please visit www.rbc.com/privacy.
• This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. The reader is solely liable for any use of the information contained in this document and Royal Bank of Canada (“RBC”) nor any of its affiliates nor any of their respective directors, officers, employees or agents shall be held responsible for any direct or indirect damages arising from the use of this document by the reader. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
• This document may contain forward-looking statements within the meaning of certain securities laws, which are subject to RBC’s caution regarding forward-looking statements. ESG (including climate) metrics, data and other information contained on this website are or may be based on assumptions, estimates and judgements. For cautionary statements relating to the information on this website, refer to the “Caution regarding forward-looking statements” and the “Important notice regarding this document” sections in our latest climate report or sustainability report, available at: https://www.rbc.com/community-social-impact/reporting-performance/index.html. Except as required by law, none of RBC nor any of its affiliates undertake to update any information in this document.

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2. BANK OF CANADA MONETARY POLICY & RATE DATA

Latest Policy Notice: Bank of Canada maintains the policy rate at 2¼%

• The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.
• The conflict in the Middle East is now in its fourth month. The resulting increases in energy prices and disruptions in global supply chains are weighing on global economic growth and pushing up inflation. At the same time, the US administration continues to propose new tariffs and trade policy uncertainty remains elevated.
• In the United States, economic growth remains solid, supported by consumption and AI‑related investment. In the euro area, growth is subdued, with higher energy prices weighing on activity. China’s economic growth continues to be supported by strong exports.
• Canadian financial conditions have loosened since the April Monetary Policy Report. Global equity markets have been buoyant and bond yields remain volatile. The Canadian dollar has weakened against the US dollar and other currencies.
• In Canada, GDP edged down by 0.1% in the first quarter, weaker than expected at the time of the April MPR. Consumer spending grew 1.4% but government spending unexpectedly declined. Housing activity also declined and business investment remained weak. Exports fell while imports rose strongly as inventories were rebuilt. Employment was up in May, but looking through monthly volatility, employment in Canada is little changed since the start of the year. The unemployment rate continues to fluctuate in the 6 ½%-7% range with the most recent reading at 6.6% in May.
• Recent data suggests that growth will resume in the second quarter but, even with some rebound, the economy is expected to remain in excess supply.
• As expected, CPI inflation rose in April, reaching 2.8%. The increase reflects energy prices, both higher oil prices and the impact of the elimination of the consumer carbon tax falling out of the 12-month rate of inflation. So far, there has been limited evidence of broad-based pass-through of higher energy prices to other consumer prices. Measures of core inflation have moved down to around 2% and the share of CPI components growing above 3% is close to its historical average. Food price inflation moderated but remains high, and shelter inflation continued to slow. With global oil prices still elevated—roughly $10 a barrel above our April MPR assumptions—total inflation is expected to hover around 3% in the near term before easing gradually towards 2%.
• Against this overall backdrop, Governing Council decided to maintain the policy rate at 2.25%.  Economic activity in Canada has been weak and uncertainty about US trade policy persists. The conflict in the Middle East is ongoing and oil prices remain elevated. Governing Council is continuing to look through the war’s near-term impact on headline inflation, but will not let higher energy prices become persistent inflation. As the outlook evolves, we stand ready to respond as needed. The Bank is committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.
• The next scheduled date for announcing the overnight rate target is July 15, 2026. The Bank’s next MPR will be released at the same time.

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3. GOVERNMENT OF CANADA REVENUE & TAX LIMITS (2026)

• TFSA Limit: The official Tax-Free Savings Account limit for the year 2026 is exactly $7,000. Cumulative space since 2009 equals $109,000.
• RRSP Cap: Registered Retirement Savings Plan dollar ceiling is $33,810 (capped at 18% of prior earned calendar income).
• Macro Consumption Growth Baseline: Real consumption profiles tracking overall national baseline expansion curves at +2.3%.

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Who are you? What is your name?

I'm FISCAL, a friendly AI assistant focused on Canadian banking, personal finance, and investments. My name is FISCAL. You can call me FISCAL. I'm here to help you with everyday money topics — chequing and savings accounts, credit cards and credit scores, mortgages, TFSAs, RRSPs, FHSAs, RESPs, GICs, ETFs, budgeting, debt repayment, and investing basics — all in a Canadian context. Ask me anything money-related and I'll do my best to help.

Should I pay off debt or invest first?

It usually depends on the interest rates involved. High-interest debt like credit cards (around 19.99%) almost always beats expected investment returns, so paying that off first is the better move. For low-interest debt like a mortgage at 4 to 5%, the choice gets fuzzier and depends on your risk tolerance and goals. Many Canadians take a balanced approach: pay down high-interest debt aggressively while contributing at least enough to capture any employer RRSP match, since that's effectively free money.

What is a consumer proposal in Canada?

A consumer proposal is a legal agreement, filed through a Licensed Insolvency Trustee, where you offer to repay a portion of your unsecured debts over up to five years. Creditors must agree to the proposal for it to take effect. It's often considered an alternative to bankruptcy because it lets you keep assets like a home or car while reducing what you owe. Both bankruptcy and a consumer proposal seriously affect your credit, so they're last-resort tools after other debt strategies have been exhausted.

What's the difference between secured and unsecured credit?

Secured credit is backed by collateral, an asset the lender can seize if you don't pay. Mortgages, car loans, and secured credit cards are examples. Because the lender's risk is lower, interest rates tend to be lower. Unsecured credit, like most credit cards and personal loans, has no collateral, so lenders rely on your credit score and income, and rates are higher. Both can be useful tools in a Canadian financial plan, but it's important to understand the trade-offs.

How do I pay off debt faster?

Two popular strategies. The avalanche method means paying minimums on all debts and putting extra money toward the highest-interest debt first, which saves the most money overall. The snowball method targets the smallest balance first regardless of rate, which can build motivation as accounts disappear one by one. In Canada, a common high-interest debt to prioritize is credit card balances at around 19.99%. Beyond strategy, freeing up cash by cutting expenses, avoiding new debt, and putting any extra income (like a tax refund) straight to debt accelerates your progress.

What is risk tolerance?

Risk tolerance is your willingness and ability to handle ups and downs in your investments. It's shaped by both psychology, how stressed you get by a big drop, and circumstances, such as your time horizon, income stability, and total savings. Younger investors with decades to go often can afford more equity risk; people close to retirement usually pivot toward more conservative mixes. Most Canadian brokerages and robo-advisors offer questionnaires to help you find your level.

What is the Home Buyers' Plan in Canada?

The Home Buyers' Plan, or HBP, is a federal program that lets first-time home buyers in Canada withdraw up to $60,000 from their RRSP toward a qualifying home, without triggering income tax on the withdrawal at the time. If buying with a partner who also qualifies, together you can withdraw up to $120,000. You repay the amount back into your RRSP over 15 years starting the second year after withdrawal. If you miss a repayment in a given year, that portion is added to your taxable income for that year.

What is a GIC?

A GIC, or Guaranteed Investment Certificate, is a Canadian savings product where you deposit money with a bank or credit union for a fixed term (typically 30 days to 5 years) and receive a guaranteed interest rate. GICs are very low risk because your principal is protected. Cashable GICs let you withdraw early, while non-redeemable GICs typically offer higher rates in exchange for locking in. GICs can be held inside a TFSA or RRSP to shelter the interest from tax.

What is the difference between a fixed and variable rate mortgage in Canada?

With a fixed-rate mortgage, your interest rate is locked in for the entire term (typically 5 years), so your payments stay the same regardless of what rates do. A variable-rate mortgage fluctuates with the Bank of Canada's prime rate. When rates drop, more of your payment goes toward principal; when rates rise, more goes toward interest. Variable rates have historically been lower on average over time, but they carry more risk. The right choice depends on your financial stability and comfort with uncertainty.

What is pay yourself first?

Pay yourself first is a budgeting principle where you automatically move money into savings or investments the moment you get paid, before spending on anything else. The idea is to treat savings like a non-negotiable bill. Setting up automatic transfers from chequing into a TFSA or RRSP right after payday makes it almost effortless and removes the temptation to spend first and save later.

How long does it take for a cheque to clear in Canada?

In Canada, banks must make the first $100 of a Canadian-dollar cheque deposit available the same business day (for deposits at branches or ATMs) or the next business day. The rest is typically available within 4 to 5 business days, depending on the amount and your account history. For larger or new accounts, the bank may place a longer hold. If a cheque bounces, the funds will be reversed from your account, so it's worth treating cheque deposits as pending until they've fully cleared.

What is a dividend yield?

Dividend yield shows how much a company pays out in dividends each year relative to its stock price, expressed as a percentage. For example, if a stock trades at $100 and pays $4 in annual dividends, its dividend yield is 4%. Canadian investors should also know that dividends from Canadian corporations may qualify for the Canadian dividend tax credit, which can reduce the tax owed on that income when held in a non-registered account.

What is a TFSA?

A TFSA, or Tax-Free Savings Account, is one of the most flexible registered accounts available to Canadians. Any money you earn inside a TFSA, whether from interest, dividends, or growth, is completely tax-free, and withdrawals are also tax-free at any time. Every Canadian resident aged 18 or older accumulates contribution room each year. Unused room carries forward indefinitely, and when you withdraw, that room is restored the following calendar year. You can hold cash, GICs, stocks, ETFs, and mutual funds inside a TFSA.

What is the difference between annual fee and no fee credit cards?

No-fee credit cards have no annual cost but typically earn lower rewards and offer fewer perks. Annual-fee cards charge anywhere from $99 to $700+ per year, but in return they often offer richer rewards, travel insurance, concierge services, and lounge access. The decision comes down to math: if the rewards and perks you actually use outweigh the fee, the annual-fee card is worth it. If not, stick with no-fee. Many Canadians use both, a no-fee card for low-reward categories and an annual-fee card for travel.

What are non-sufficient funds fees?

An NSF, or non-sufficient funds fee, is what a Canadian bank charges when a transaction (like a cheque or pre-authorized debit) tries to clear but your account doesn't have enough money to cover it. NSF fees at the big banks are typically around $45 per occurrence, plus the company that tried to pull the payment may charge their own fee. Setting up low-balance alerts and overdraft protection are practical ways to avoid getting stung.

What is a RRIF?

A RRIF, or Registered Retirement Income Fund, is the account your RRSP gets converted into by December 31 of the year you turn 71. From there, you must withdraw a minimum amount each year, based on a CRA-set percentage that increases with age, and pay tax on the withdrawals as income. You can still invest within the RRIF and let it grow tax-deferred. Many Canadians use a RRIF as a primary source of retirement income alongside CPP and OAS.

What is the latte factor?

The latte factor is a popular metaphor for small daily expenses that add up to a meaningful amount over time, your daily coffee being the classic example. Spending $5 on a latte every workday is roughly $1,250 a year. Invested at a 6% average return, that could grow to over $20,000 in a decade. The idea isn't to ban small treats but to recognize that consistent small spending decisions matter. Redirecting some of that toward a TFSA can quietly accelerate your savings.

What is an Interac e-Transfer?

Interac e-Transfer is a Canadian service that lets you send and receive money directly between bank accounts using just an email address or phone number. It's fast, available at virtually every Canadian bank and credit union, and usually free or included in your monthly banking plan. Transfers are typically deposited within minutes when the recipient has Autodeposit enabled. It's the most common way Canadians send money to individuals, whether splitting bills, paying rent, or sending money to family. For larger amounts or international transfers, a wire transfer is more appropriate.

What is a robo-advisor?

A robo-advisor is an online investing service that builds and manages a diversified portfolio for you based on a questionnaire about your goals and risk tolerance. In Canada, well-known robo-advisors include Wealthsimple Invest, Questrade's Portfolio IQ, and BMO SmartFolio. Fees are typically much lower than traditional mutual funds, and the platforms handle rebalancing automatically. They're a good option if you want a hands-off, diversified portfolio inside a TFSA or RRSP.

What is the difference between a chequing and a savings account?

Chequing accounts are built for daily spending: easy access through Interac debit, e-Transfers, and bill payments with no real limits on transactions. Savings accounts are meant to hold money you don't need right away and earn interest over time. Most people benefit from having both, a chequing account for day-to-day expenses and a savings account, or a TFSA, for building an emergency fund or short-term goals.

What is a chequing account?

A chequing account is a bank account built for everyday transactions. You can deposit money, pay bills, use a debit card, and withdraw cash. In Canada, most chequing accounts come with a monthly fee, though many banks waive it if you maintain a minimum balance. Features typically include Interac debit, online banking, and Interac e-Transfer. Unlike savings accounts, chequing accounts pay little to no interest, but they give you immediate access to your funds.

What is dollar-cost averaging?

Dollar-cost averaging is an investment strategy where you invest a fixed amount at regular intervals, like monthly, regardless of market conditions. When prices are low, your fixed amount buys more units; when prices are high, it buys fewer. Over time this smooths out your average cost and removes the pressure of trying to time the market. It's a practical approach for Canadians contributing regularly to a TFSA or RRSP through an ETF or mutual fund, and works well as an automatic contribution through your bank or brokerage.

What is an index fund or ETF?

An index fund or ETF (Exchange-Traded Fund) is an investment that tracks a market index such as the S&P 500 or the S&P/TSX Composite, which represents the Canadian stock market. Rather than picking individual stocks, the fund holds all or most of the securities in the index. This provides broad diversification at very low cost. ETFs trade on the stock exchange like individual stocks and are popular with Canadian investors for holding inside TFSAs and RRSPs. Historically, low-cost index funds have outperformed the majority of actively managed funds over the long term.

What is overdraft protection?

Overdraft protection is a service offered by Canadian banks and credit unions that covers transactions when your chequing account drops below zero, rather than declining the payment. The bank covers the shortfall and charges either a flat fee per overdraft event or interest on the overdrawn amount. Some institutions link your chequing account to a savings account or line of credit to cover the difference at lower cost. It's useful as a safety net but shouldn't be relied on regularly, the fees and interest add up quickly.

What is a joint bank account?

A joint bank account is one held by two or more people, with each having full access to deposit, withdraw, and manage funds. In Canada, joint accounts are common among spouses, parents and adult children, or roommates sharing expenses. They can simplify shared bills but come with shared liability, anyone on the account can withdraw all the funds. There can also be tax and estate implications, especially when a joint account is set up with an adult child.

What is the FHSA?

The FHSA, or First Home Savings Account, is a Canadian registered account introduced in 2023 to help first-time home buyers save for a down payment. It combines the best of both worlds: contributions are tax-deductible like an RRSP, and qualifying withdrawals to buy a first home are completely tax-free like a TFSA. You can contribute up to $8,000 per year with a lifetime limit of $40,000. Unused room carries forward, but you can only have up to $8,000 of carried-forward room at a time. You must be a Canadian resident, 18 or older, and a first-time home buyer.

How are capital gains taxed in Canada?

In Canada, only 50% of capital gains are included in your taxable income, an effective half-rate compared to regular employment income. So if you realize a $10,000 gain in a non-registered account, $5,000 is added to your taxable income for the year. Capital gains inside a TFSA are entirely tax-free, and inside an RRSP they're tax-deferred until withdrawal. This is one reason registered accounts are so powerful for long-term investing.

How does a credit score work in Canada?

In Canada, credit scores range from 300 to 900 and are provided by Equifax and TransUnion. Lenders use your score to decide whether to approve you for a loan or credit card and at what interest rate. The score is based on payment history (the biggest factor), credit utilization, length of credit history, types of credit, and recent applications. Paying bills on time and keeping balances low relative to your limit are the most effective ways to build and maintain a strong score.

What is foreign exchange spread?

When you convert one currency to another, the bank or service charges you a rate that's slightly worse than the official mid-market rate, the difference is the spread. Major Canadian banks typically charge a 2 to 3% spread on foreign exchange, on top of any explicit fees. Specialty services like Wise or Revolut often have much narrower spreads. For travel or US-dollar investing, paying attention to the spread can save you meaningfully over time.

What is the 50/30/20 budgeting rule?

The 50/30/20 rule is a simple budgeting framework. Put 50% of your after-tax income toward needs like rent, groceries, utilities, and transit. Thirty percent goes to wants like dining out, entertainment, and subscriptions. The remaining 20% is for savings and debt repayment. It's a useful starting point, though Canadians in high-cost cities like Toronto or Vancouver may need to adjust the percentages, as housing alone can easily exceed 50% of take-home pay.

What is a travel credit card?

A travel credit card is a Canadian credit card that earns rewards in points or miles you can redeem for flights, hotels, or other travel. Many waive foreign transaction fees (typically 2.5% on purchases in foreign currencies) and include perks like travel insurance, airport lounge access, or free checked bags. They usually come with an annual fee, so they make sense if you travel often enough to outearn the fee through rewards and perks.

What is the difference between cashback and travel rewards cards?

Cashback cards give you a percentage of your spending back as a statement credit or cash deposit, simple and flexible. Travel rewards cards earn points or miles redeemed for travel, often at higher value than cash for certain redemptions but with more restrictions. For Canadians who don't travel much or prefer simplicity, cashback usually wins. For frequent travellers, top-tier travel cards can deliver more value once perks like lounge access and insurance are factored in.

What is a bull market versus a bear market?

A bull market is a period of rising stock prices, usually driven by strong economic conditions, investor optimism, and high confidence. A bear market is the opposite: a sustained drop of 20% or more from recent highs, often tied to economic slowdowns or recession fears. Both are normal parts of the market cycle. For long-term Canadian investors, dollar-cost averaging through both kinds of markets via a TFSA or RRSP is a way to ride out the swings.

How do Canadian income tax brackets work?

Canada uses a progressive tax system at both the federal and provincial levels. Income is taxed in tiers, only the income above each threshold is taxed at the higher rate, not your entire income. For example, if a bracket boundary is $55,000 and you earn $60,000, only the $5,000 above the threshold is taxed at the higher rate. Your marginal tax rate is the rate on your next dollar earned; your average rate is your total tax divided by total income.

What is income splitting?

Income splitting is a strategy where a higher-income spouse shifts income to a lower-income spouse to reduce overall household tax. In Canada, common methods include spousal RRSPs, pension income splitting in retirement, and the Tax-Free First Home Savings Account contributions. The CRA has rules to prevent abuse (like attribution rules), so it's worth talking to a tax professional for anything beyond the basics.

What is the difference between marginal and average tax rates?

Your marginal tax rate is the rate of tax you pay on your next dollar of income, the rate of the highest tax bracket you reach. Your average tax rate is your total tax divided by your total income. The marginal rate matters most when deciding whether to contribute to an RRSP (it tells you the size of your deduction's benefit) or when comparing investments by their after-tax return. The two rates can differ significantly because lower brackets only tax a portion of your income.

What is a beneficiary designation?

A beneficiary designation is your instruction on who receives the funds in a registered account (like a TFSA, RRSP, or RRIF) when you die. In most provinces, you can name a beneficiary directly on the account, which lets the funds bypass your estate and probate. In Quebec, beneficiary designations on registered accounts must be made through a will. Keeping these designations up to date, especially after major life events, is one of the easiest pieces of estate planning.

What is the difference between fixed and variable expenses?

Fixed expenses are costs that stay roughly the same each month, like rent, mortgage payments, insurance, and many subscriptions. Variable expenses change month to month, like groceries, dining out, utilities, and gas. When you're building a budget, fixed expenses are easy to forecast but harder to cut. Variable expenses are often where you'll find the most flexibility to save, so reviewing those line items regularly is one of the best ways to free up cash.

How can I protect myself from phishing scams?

Phishing scams try to trick you into giving up personal or banking information through fake emails, texts, or websites. Some practical defences: never click links in unexpected messages claiming to be from your bank, the CRA, or Interac, log in by typing the address directly. Watch for urgent language, spelling errors, or generic greetings. Enable two-factor authentication on your bank and email. And if something looks off, call your financial institution using the number on the back of your card, not one provided in the message.

What's the difference between mortgage pre-qualification and pre-approval?

Pre-qualification is a quick informal estimate of what you might be able to borrow, based on numbers you share. It's helpful for early planning but doesn't carry weight with sellers. Pre-approval is a more formal process in Canada where a lender pulls your credit, verifies your income, and locks in a specific rate for 90 to 120 days. Pre-approval gives you a real budget and protects you from rate increases while you shop for a home.

What is CDIC insurance?

CDIC stands for the Canada Deposit Insurance Corporation. It's a federal Crown corporation that protects eligible deposits at member institutions (such as the major banks and many federally regulated trust companies) up to $100,000 per depositor per deposit category. Categories include deposits in your own name, joint deposits, RRSP deposits, TFSA deposits, and a few others, each protected separately up to the limit. Chequing accounts, savings accounts, GICs with terms of five years or less, and money orders are all covered. Credit unions are not CDIC members but are covered by provincial deposit protection programs.

What is CPP?

CPP, the Canada Pension Plan, is a contributory retirement pension funded by payroll deductions from employees, employers, and the self-employed. You can start CPP as early as age 60 (with a reduction) or delay up to age 70 (with an increase). Your monthly amount depends on how much and how long you contributed. CPP is taxable income in retirement and works alongside OAS, RRSP/RRIF withdrawals, and personal savings as part of most Canadians' retirement income.

How does a mortgage work in Canada?

A mortgage is a loan used to purchase property, where the property itself serves as collateral. In Canada, mortgages have an amortization period (typically up to 25 years for insured mortgages) and a shorter term, commonly 5 years, after which you renew at the current rate. Each payment covers principal and interest. If your down payment is less than 20%, your mortgage must be insured through CMHC, Sagen, or Canada Guaranty, and you'll pay a mortgage insurance premium. With 20% or more down, mortgage insurance isn't required.

What is the difference between a TFSA and an RRSP?

Both are registered accounts with tax advantages, but they work differently. With an RRSP, you get a tax deduction when you contribute, reducing your taxable income today, and pay tax when you withdraw in retirement. With a TFSA, there's no upfront deduction, but all growth and withdrawals are completely tax-free. If you expect to be in a lower tax bracket in retirement than you are now, an RRSP tends to win. If you expect a similar or higher bracket later, or want flexibility to withdraw without tax, a TFSA is often the better choice. Many Canadians use both.

How does a balance transfer work?

A balance transfer moves debt from one or more credit cards onto a new card to take advantage of a lower promotional rate. Some Canadian cards offer low or 0% promotional rates on balance transfers for a set period, letting you pay down principal without much interest piling up. Most cards charge a balance transfer fee of 1% to 3% of the amount moved. To actually benefit, have a plan to pay off the balance before the promo period ends, the standard rate (often around 19.99%) kicks in on whatever's left after.

What is a high-interest savings account?

A high-interest savings account, or HISA, is a savings account that pays a meaningfully higher interest rate than a regular savings account, often offered by online banks or specific products at big banks. In Canada, HISAs are useful for emergency funds or short-term goals where you want easy access to your money. Some HISAs can be held inside a TFSA, so the interest grows tax-free. Just watch for promotional rates that drop after a few months.

What is tax-loss harvesting?

Tax-loss harvesting is a strategy where you sell investments at a loss in a non-registered account to offset capital gains realized elsewhere, reducing your tax bill. In Canada, capital losses can be applied against gains in the current year, carried back three years, or carried forward indefinitely. Watch out for the superficial loss rule: if you (or someone affiliated) buy back the same security within 30 days, the loss is denied.

What is a sinking fund?

A sinking fund is money you set aside regularly for a known future expense, like an annual insurance premium, holiday gifts, or a planned vacation. Instead of being surprised by big bills, you contribute a smaller amount each month so the money is ready when needed. In Canada, a high-interest savings account or a TFSA-held HISA is a common home for sinking funds because the cash is accessible and earning some interest.

What is an RESP?

An RESP, or Registered Education Savings Plan, is a Canadian registered account designed to help save for a child's post-secondary education. Contributions aren't tax-deductible, but the investments grow tax-deferred, and the government adds money through the Canada Education Savings Grant: 20% on the first $2,500 contributed each year per child, up to $500 annually and $7,200 lifetime per beneficiary. When the child withdraws for school, the grants and growth are taxed in the student's hands, usually at a very low rate.

How does direct deposit work in Canada?

Direct deposit is the automated transfer of money into your bank account, typically used for paycheques, government benefits, and tax refunds. You provide your employer or the CRA with a void cheque or your account's transit, institution, and account numbers, and payments arrive directly on the scheduled date. It's faster, more secure than paper cheques, and lets you start using the funds the same day they arrive.

What is an employer RRSP match?

An employer RRSP match is a workplace benefit where your employer contributes to your RRSP based on your own contributions, often matching some percentage up to a cap. For example, an employer might match 100% of contributions up to 5% of your salary. That's effectively a 100% return on your contribution before any investment growth, which is why it's usually the highest-priority place to put money. Always check your benefits package for these match programs.

What is a bond yield?

A bond yield is the return you get from holding a bond. The two most common measures are coupon yield (annual coupon payment divided by face value) and yield to maturity (the total return if held to maturity, including capital gain or loss). Yields and bond prices move inversely: when interest rates rise, existing bond prices fall, pushing yields up, and vice versa. Canadian investors often hold bonds or bond ETFs inside an RRSP because interest income is taxed at full marginal rates outside registered accounts.

Can you explain what a mutual fund is?

A mutual fund is a professionally managed investment pool that collects money from many investors to buy a diversified portfolio of stocks, bonds, or other securities. They're a popular choice for everyday investors because they provide instant diversification and professional management, usually for a relatively low cost. In Canada, mutual funds are commonly held inside registered accounts like TFSAs and RRSPs.

What is asset allocation?

Asset allocation is how you divide your portfolio across the major asset classes, typically equities, fixed income, and cash. It's the single biggest driver of long-term returns. A common Canadian starting point might be 60% equities and 40% bonds for a balanced investor, with adjustments based on age and risk tolerance. The allocation can sit inside a TFSA, RRSP, or non-registered account, depending on tax considerations.

What is the mortgage stress test in Canada?

The Canadian mortgage stress test is a federal rule that requires all mortgage applicants to prove they can afford payments at a higher interest rate than the one offered. For insured mortgages, you must qualify at either 5.25% or your contract rate plus 2%, whichever is higher. The same benchmark applies to uninsured mortgages. The purpose is to make sure borrowers can still manage payments if rates rise after they buy. It applies whether you're a first-time buyer or renewing with a different lender.

What is an interest rate?

An interest rate is the cost of borrowing money, expressed as a percentage of the loan amount. If you take out a $10,000 loan at a 6% annual interest rate, you'll pay $600 in interest per year on top of repaying the principal. In Canada, the Bank of Canada sets the policy interest rate, which influences the prime rate that banks use as a benchmark for variable-rate mortgages and lines of credit. Interest rates also apply to savings accounts, where the bank pays you for keeping your money there.

What is a P/E ratio?

The price-to-earnings ratio, or P/E, is a stock's price divided by its earnings per share. It's a common way to gauge whether a stock is expensive or cheap relative to how much the company earns. A higher P/E suggests investors expect more growth; a lower P/E may suggest a value play or skepticism about future earnings. It's most useful when comparing companies within the same industry, since average P/E ratios vary a lot across sectors.

How do I build credit in Canada?

Building credit in Canada starts with getting a credit product and using it responsibly. A secured credit card, where you provide a deposit as collateral, is a good entry point if you have no credit history. Use it for small purchases and pay the full balance every month. Some banks and credit unions also offer credit-builder loans. Being added as an authorized user on a family member's card can help too. The two most important habits: pay every bill on time and keep your utilization below 30% of your limit. Over several months, your score will climb.

What is probate in Canada?

Probate is the legal process of validating a will and giving the executor authority to administer the estate. In Canada, probate fees vary by province, Ontario, for example, charges Estate Administration Tax that's roughly 1.5% on assets over $50,000. Assets that pass through joint ownership or named beneficiary designations (like RRSPs and TFSAs) typically bypass probate. Estate planning often focuses on minimizing the value of assets that go through probate.

What is a spousal RRSP?

A spousal RRSP is an RRSP where one spouse contributes and gets the tax deduction, but the other spouse owns the account and eventually withdraws the funds. It's a tool for income splitting in retirement, especially useful when one spouse expects much higher income than the other. There's a three-year rule: if your spouse withdraws from the spousal RRSP within three calendar years of your contribution, the withdrawal is attributed back to you for tax purposes.

What is an RRSP?

An RRSP, or Registered Retirement Savings Plan, is a Canadian retirement account that provides a tax deduction when you contribute. The money inside grows tax-deferred, meaning you don't pay tax on investment gains until you withdraw. Withdrawals in retirement are taxed as income, but most people are in a lower tax bracket by then, making the overall tax savings significant. You can contribute up to 18% of your previous year's earned income, up to an annual CRA limit. The deadline to contribute for the prior tax year is typically the first 60 days of the new year.

What is APR?

APR stands for Annual Percentage Rate. It represents the true yearly cost of borrowing, including the interest rate plus fees and additional charges, so it's a more complete picture than the interest rate alone. In Canada, the equivalent disclosure you'll often see is the effective annual rate, or EAR, particularly on credit cards. When comparing loan or credit card offers, compare APR or EAR rather than just the stated interest rate.

What is a hard credit inquiry versus a soft inquiry?

A hard inquiry happens when a lender pulls your credit report to make a lending decision, like applying for a mortgage, car loan, or credit card. Hard inquiries can knock a few points off your credit score temporarily and stay on your report for about three years in Canada. A soft inquiry happens during things like a pre-approval check you initiate, an employer background check, or when you check your own credit. Soft inquiries don't affect your score.

What is the FIRE movement?

FIRE stands for Financial Independence, Retire Early. The core idea is to save and invest a high percentage of your income, often 50% or more, so that investment returns can cover your living expenses long before traditional retirement age. In Canada, FIRE often involves maxing out TFSAs and RRSPs and building a low-cost ETF portfolio. There are softer flavours too: Lean FIRE (very frugal lifestyle), Fat FIRE (higher spending target), and Coast FIRE (saving aggressively early, then letting compounding do the work).

What is the difference between a stock and a bond?

A stock represents partial ownership in a company. When you buy a stock, you become a shareholder and can benefit from the company growing in value. A bond is essentially a loan you make to a company or government, paid back with regular interest over a set period. Stocks carry higher risk but higher potential returns, while bonds are generally more stable but with lower returns. Both can be held inside registered accounts like a TFSA or RRSP in Canada.

What is mortgage refinancing?

Refinancing a mortgage means breaking your existing mortgage and replacing it with a new one, usually to access home equity, secure a lower interest rate, or restructure your loan. In Canada, breaking a fixed-rate mortgage typically triggers a prepayment penalty calculated as the greater of three months' interest or the interest rate differential (IRD). It's worth running the numbers carefully, sometimes the penalty wipes out the savings from a lower rate.

What is a personal loan?

A personal loan is an unsecured loan from a bank, credit union, or online lender that you repay in fixed monthly installments over a set term. Because there's no collateral, lenders rely on your credit score and income to decide on approval and rate. In Canada, personal loans are commonly used to consolidate high-interest credit card debt, cover large one-time expenses, or fund home improvements. Rates vary a lot based on your credit profile, so compare offers from multiple lenders, credit unions often have competitive rates.

What is a LIRA?

A LIRA, or Locked-In Retirement Account, is a Canadian retirement account that holds pension funds transferred from a former employer's pension plan. The money stays locked in, meaning you can't withdraw it freely, until retirement, when it's converted into a Life Income Fund (LIF) or used to buy a life annuity. LIRAs are governed by either federal or provincial pension legislation depending on where the original pension came from.

What is a good credit score in Canada?

Canadian credit scores run from 300 to 900. Generally, below 560 is poor, 560 to 659 is fair, 660 to 724 is good, 725 to 759 is very good, and 760 and above is excellent. A score of 660 or higher will qualify you for most loan and credit products, while scores above 760 typically unlock the best interest rates. If your score is lower, consistent on-time payments and reducing credit card balances are the fastest ways to improve it.

What are the Big 6 banks in Canada?

The Big 6 are the six largest banks in Canada: RBC (Royal Bank of Canada), TD (Toronto-Dominion Bank), Scotiabank, BMO (Bank of Montreal), CIBC (Canadian Imperial Bank of Commerce), and National Bank of Canada. They dominate Canadian banking, offering chequing and savings accounts, mortgages, credit cards, and investment accounts. They're all federally regulated and CDIC members. They offer convenience and stability, but credit unions and online banks sometimes have better rates and lower fees for specific products.

What is OAS?

OAS, or Old Age Security, is a Canadian government pension paid to most Canadians 65 and older who meet residency requirements. Unlike CPP, it's funded out of general tax revenue and you don't need to have contributed to receive it. The amount depends on how long you've lived in Canada since age 18. Higher-income seniors face an OAS clawback when their net income exceeds a threshold (around $90,000+, indexed annually).

What is a reverse mortgage in Canada?

A reverse mortgage is a loan available to Canadian homeowners aged 55 or older that lets you borrow against your home's equity without monthly payments. The loan plus accumulated interest is repaid when you sell the home, move out, or pass away. Two main providers in Canada are HomeEquity Bank (CHIP) and Equitable Bank. Reverse mortgages can supplement retirement income, but interest rates are typically higher than traditional mortgages and the balance grows over time.

What is a HELOC?

A HELOC, or Home Equity Line of Credit, is a secured line of credit using your home as collateral. In Canada, you can typically borrow up to a combined 80% of your home's value when factoring in your mortgage. HELOCs offer flexibility and lower interest rates than unsecured borrowing because the home backs the loan, but missing payments puts your property at risk. They're often used for renovations, debt consolidation, or as a backup line for emergencies.

What is inflation and how does it affect my savings?

Inflation is the general rise in prices over time, which reduces the purchasing power of money. In Canada, the Bank of Canada targets inflation around 2%. If inflation is running at 3% and your savings account is only earning 1%, your money is losing real value. That's why holding large amounts of cash in a low-interest account long-term isn't ideal. Keeping savings in a high-interest savings account or GIC, and investing a portion in diversified assets like equities, helps protect your wealth against inflation.

Dealing with a rise in interest rates

Pay down your debt as much as possible to deal with a rise in interest rates. If you have less debt, you may be able to pay it off more quickly. This may help you avoid the financial stress caused by higher interest rates and bigger loan payments.

You may deal with a rise by using these tips: reduce expenses so you have more money to pay down your debt pay down the debt with the highest interest rate first. This may allow you to pay less interest over the term of your loan consolidate high interest debts, such as credit cards, into a loan with a lower interest rate avoid getting the maximum mortgage or line of credit that a lender offers you avoid taking on unnecessary debt with things you want but don’t need avoid borrowing more money as it could limit your ability to save for your goals find ways to increase your income to help you pay down debt make sure you have an emergency fund to deal with unexpected expenses. This may help you cover higher loan payments to avoid penalties

Choosing a debt repayment strategy

A clear repayment strategy may help you pay your debt more efficiently. It may also reduce the stress and uncertainty of managing multiple debts.

Choose a payment schedule

Set a reasonable and affordable payment schedule. This may help you maintain your progress without feeling overwhelmed. The length of your payment schedule affects the total interest you’ll pay. If interest rates rise, your monthly payments may increase. Make sure you have some flexibility in your budget to account for increases in interest rates. Your payment schedule needs to align with your monthly budget.

Consistently paying on time over a longer period may improve your credit score. Missing payments due to an aggressive payment schedule may harm your credit.

With a shorter payment schedule:

• you pay less interest but have higher monthly payments
• you might have difficulty keeping up with your payments
• it may seem impossible to continue to make your payments

With a longer payment schedule, your monthly payments will be lower but you’ll pay more interest. It may make payments more manageable. If your payment schedule is too long, you might lose your motivation because you won't see progress.

Decide which debts to pay off first

Deciding which debts you’ll pay first depends on your financial goals and motivation. There are 2 main strategies to determine which debts to pay first. You may start with:

• debts with higher interest rates
• debts with the lowest balance
• There are benefits for each strategy. With either strategy, you need to continue making the minimum payments on all your debts. Before you chose a debt repayment strategy, consider paying off past due accounts first.

Past due accounts

If you don't pay on time, your account becomes past due. Companies call these past due accounts or accounts in arrears. Paying them off quickly may prevent extra charges from accumulating. Late payments harm your credit score. Paying off your past due accounts may help you protect or improve your credit. If your accounts remain past due for too long, your creditor may send them to a debt collector. This may lead to more severe consequences, including legal action.

Debts with higher interest rates

By paying off your debts with the highest interest first, you’ll pay less interest. This will help you be debt-free sooner. To use this strategy, list your debts in order, from the highest interest rate to the lowest. Put money towards the debt with the highest interest rate.

Debts with the lowest balance

You may find it easier to start repaying your debt with the lowest balance. You may see progress quickly, which may help you stay committed to your debt repayment plan. This can keep you motivated to maintain your goal to become debt-free. This strategy may cost you more over time. To use this strategy, list your debts in order, from the lowest balance to the highest. Use any extra money to pay down the debt with the lowest balance.

Working with your creditors

Effectively managing debt may involve talking and negotiating with your creditors.

Financial institutions and other companies

Contact your creditors to discuss your financial situation. Your creditors are the financial institutions and companies you owe money to.

They may offer:

• a lower interest rate on your debt
• to extend your payments over a longer period to reduce your minimum monthly payment. This will cost you more in interest
• to consolidate your debts into 1 loan

Family and friends

If you borrowed money from family or friends, talk to them about the amount you owe. Commit to a payment schedule that works for both of you. You may create a written agreement that includes the amount and the payment schedule. Consider writing post-dated cheques or setting up automatic money transfers to follow your payment plan. This will show your commitment to repaying them.

Closing your accounts

Once you pay a loan, line of credit or credit card, consider closing that account. Only keep what you need and can manage responsibly. Consider keeping open the credit account you’ve had the longest. This helps you maintain a long-term credit history, which may improve your credit score.

How student lines of credit work

A line of credit is a credit product that lets you borrow money repeatedly up to a pre-set limit. You can borrow money, pay it back and then borrow again, up to your credit limit.

A student line of credit is a product for students. It helps you pay for expenses related to post-secondary education, like tuition or books. You can also use it to help cover everyday expenses, like food and transportation.

With a line of credit, you only have to pay back the money you borrow. You also only have to pay interest on the money you borrow. For example, suppose your line of credit has a $10,000 limit. You borrow $3,000. This means that you’ll pay interest on the $3,000.

With a student loan, as opposed to a line of credit, you receive a set amount of money and have to pay it all back.

Applying for a student line of credit

You may need someone, like a parent, to co-sign your line of credit application. This person will also be responsible for the debt if you can’t pay it back.

Your financial institution will set the maximum amount of money you’ll be able to borrow. The amount you can borrow may depend on the program you’re studying and the school offering the program. It may also depend on your living expenses, credit history and ability to repay the money you borrow.

You can apply for a student line of credit at any time. Usually, you apply online, over the phone or in person. Contact your financial institution to find out how to apply for a student line of credit.

You’ll need to provide proof that you’re either a full-time or part-time student at a recognized Canadian post-secondary institution.

Insurance on a student line of credit

Your lender may offer you optional credit insurance on your student line of credit. It may help cover your payments in cases of serious illness, accident, death or if you lose your job.

You don’t have to take loan insurance to be approved for a student line of credit. The lender can't insist that you buy insurance.

If you decide to get insurance, make sure that the product meets your needs in terms of protection. If your lender is a federally regulated bank they must offer and sell you products and services that are appropriate for you. The offer must be based on your circumstances and financial needs. They also must tell you if they’ve assessed that a product or service isn’t appropriate for you.

Take the time to describe your financial situation to ensure you get the right product. Don't hesitate to ask questions and make sure you understand the insurance product you have or want.

Federally regulated lenders, such as banks, can’t add optional loan insurance without your permission. You can file a complaint with your bank if it adds the insurance without your permission. You should also ask your lender to remove the optional service and reverse the charges.

Accessing money from your student line of credit

You should be able to access the available credit in your student line of credit soon after:

• you’ve signed all the necessary documents
• your application is approved

You can usually access the available credit from your student line of credit:

• at a branch of your financial institution
• at an ATM
• through online, mobile or telephone banking

With some lines of credit, you may also access the money by writing a cheque. Financial institutions each have their own terms and conditions for the lines of credit they offer. Speak with your financial institution for more information about the student borrowing options they offer. Borrow only as much money as you need to cover your needs while studying. Think about whether you’ll be able to make at least the interest payments while you’re studying. Also think about whether you’ll be able to repay your line of credit debt when you graduate.

Paying back your student line of credit

You must pay at least the interest on your line of credit, even while you're studying. Once you finish school, most financial institutions allow you to continue to pay only the interest for a period. That grace period is usually 6 to 12 months after you graduate.

After that period, you must start to pay back both the money you borrowed (the principal) and the interest. You'll continue to pay interest until you repay your balance. You can start paying back the principal at any time, even while you're still studying.

Speak with your financial institution to find out their student line of credit repayment terms and conditions.

If you have a Canada Student Loan instead of a student line of credit, the repayment terms are different. For a student loan, you’ll have a 6-month non-repayment period after you graduate. During that period, you won’t have to make payments.

Comparing student lines of credit with government student loans

There are pros and cons to government student loans and student lines of credit. With a line of credit, you’ll have to pay back the money that you withdrew from your available credit. You may also get more money from a student line of credit.

When choosing between options to borrow money, it’s also important to compare the amount of interest you’ll pay. Since April 1, 2023, the Government of Canada eliminated the accumulation of interest on all Canada Student Loans. This includes the loans that are currently being repaid. Students still have to pay any interest that may have accrued before April 1, 2023. Depending on your province, interest may also accrue on the provincial portion of your loan.

If you have a Canada Student Loan instead of a student line of credit, you have access to the Repayment Assistance Plan (RAP). This plan helps students who are having trouble paying back their government student loan. This plan is not applicable to the money you borrow through a student line of credit.

Before borrowing from a student line of credit

You may be able to pay for your education without having to borrow any money at all. For example, you may use savings or grants, bursaries or scholarships. A part-time job or co-op program can also help you cover the costs of your education.

Find out if you're eligible for scholarships, bursaries and grants from the Government of Canada:

• Scholarships
• Grants

Provinces and territories also offer grant and bursary programs for their permanent residents. You may be eligible for their programs even if you don’t have a Canada Student Loan. To learn about grant and bursary programs in your province or territory, check with your student financial aid office.

Know your rights before you borrow

When you get a loan or line of credit with a federally regulated financial institution like a bank, you have the right to receive key details. These details will usually appear in an information box on your credit agreement. They can also be part of a separate document they provide to you when they approve your application.

Lines of credit: know your rights

Know your rights before you borrow

When you get a loan or line of credit with a federally regulated financial institution like a bank, you have the right to receive key details. These details will usually appear in an information box on your credit agreement. They can also be part of a separate document they provide to you when they approve your application.

Your express consent for a line of credit

Federally regulated financial institutions can only provide you with a line of credit if they have your express consent. If you give verbal consent, they must provide you with confirmation of your consent, in writing, without delay. Banks must also obtain your express consent before increasing the limit on your line of credit.

Your right to information about lines of credit

Federally regulated financial institutions must provide you with information about your line of credit. The information must be disclosed in a manner, and using language, that is clear, simple and not misleading. Before you sign a credit agreement, take the time to read and understand the terms and conditions. Ask questions if anything is unclear or if you’re not sure about what you’re signing.

Information when you get your line of credit

Federally regulated financial institutions that issue a line of credit must disclose certain information.

They must provide this information in a disclosure statement that is:

• part of the application
• part of the credit agreement, or
• set out in a separate document
• They must also provide certain information in an information box.

It can be at the beginning of your credit agreement or in a separate document you receive with it. If you’re dealing with a bank, they must present it in a single prominently displayed information box.

This includes information such as:

• the initial credit limit if they know it at the time of disclosure
• the annual interest rate, or, if it’s a variable rate, a brief description of the method for calculating it
• the date when they start charging interest, and information concerning the interest-free grace period, if any
• the amount of the minimum payment required in each payment period and a brief description of how they calculate it
• the foreign currency conversion rate, how it’s determined and when it applies
• any non-interest fees charged on an annual basis
• any other fees they may charge and the dates they apply

Your credit agreement or disclosure statement must also include:

• each period for which they’ll provide an account statement
• the description of any asset (what you own) you might have provided as security for the line of credit
• information about any related optional product or service that you accept. This includes the charges for each optional service and how you may cancel the service. This applies if they didn’t disclose the information in a separate statement before providing the optional service
• a telephone number to get information about the account during regular business hours. The number must be:

Your federally regulated financial institution may not know the initial credit limit when they provide the initial disclosure statement. In that case, they must disclose it in:

• the first account statement you receive, or
• a separate statement that you receive before or at the same time you receive your first account statement

Exceptions

You might not get the additional disclosure statement if there haven’t been any advances or payments, and:

• there’s no unpaid balance at the end of the period, or
• you’ve defaulted on your payments, and they suspended or cancelled your agreement and demanded payment of the unpaid balance. They will send you a notice about this

You might only get the additional statement every 3 months if:

• there haven’t been any advances or payments
• the unpaid balance is less than $10
• no fee or interest is being charged or accumulated

Display of information about credit agreements

Banks must disclose required information about credit agreements by:

• making it available:
  • at each of their branches in Canada and points of service
  • on each of their websites through which they offer products or services in Canada
• providing or sending it to you, upon request

Information when advertising lines of credit

Federally regulated financial institutions may promote a line of credit by advertising:

• the annual interest rate
• the amount of any payment, or
• any non-interest charge in relation to the loan
• If they do, they must disclose the annual interest rate and all non-interest charges and present it at least as prominently as the other information. Any advertisement in Canada that a bank makes must be accurate, clear and not misleading.

Your right to receive electronic alerts

Your bank is required to send you an electronic alert, without delay, in 2 situations:

• when the balance of your chequing or savings account falls below $100 or an amount you’ve set
• when the credit available on your credit card or personal line of credit falls below $100 or an amount you’ve set
• Your bank will automatically set the electronic alert to $100. You may ask your bank to set the alert to a different amount. You may also change the amount yourself through your bank’s mobile app or website.

The alert must tell you:

• that the balance of your account has fallen below the amount described above
• that the credit available on your credit card or line of credit has fallen below the amount described above
• what charges or penalties may apply to current or future transactions
• what steps to take to avoid charges or penalties and the deadline for doing this

Your bank will send the alert to you automatically. You don’t have to sign up, but you may opt out at any time by informing your bank in writing. This could be done by email. The alert doesn’t apply to accounts opened for business purposes. Your bank will send the alert via push notification, text message or email. It will depend on your contact information with the bank, the preferences you’ve set-up and the systems your bank has in place. You won’t receive the alert if you didn’t provide your bank with the necessary contact information. For example, you didn’t provide your mobile phone number or email address. For more information on electronic alerts, contact your bank or visit their website. Other financial institutions may choose to offer electronic alerts. Contact yours to find out if they offer them.

Making a budget

Why make a budget

A budget is a plan that helps you manage your money. It helps you figure out how much money you get, spend and save. Making a budget can help you balance your income with your savings and expenses. It guides your spending to help you reach your financial goals.

A budget is especially important if you:

• don't know where your money is going
• don't save regularly
• have problems paying off your debts
• feel overwhelmed by your finances
• feel like you're not in control of your finances
• want to make the most of your money
• are planning for a major purchase or a life event

Making a budget can help you:

• set spending limits
• find ways to pay down your debts
• reduce costs and save more
• live within your means
• reduce financial stress
• have more money for things that are important to you
• feel in control of your finances

What to consider before you make a budget

Take these simple steps before you make your budget.

Think about your financial goals

Identify your short-term and long-term goals. Make saving for those goals part of your budget.

Short-term goals:

• paying off your credit card
• reducing your weekly expenses
• starting to build an emergency fund

Long-term goals:

• paying off all of your debts
• saving to buy a home or a car
• saving to have children, to go to school or to retire

To deal with unexpected situations, create an emergency fund. Your emergency fund should provide you with enough money to cover your living expenses for 3 to 6 months. Having an emergency fund will help you reduce financial stress and avoid getting trapped in a debt cycle.

Know where your money is going

Tracking your money will help you figure out what comes in and what goes out of your pocket. Every dollar you spend affects your overall budget.

Try this exercise for 1 or 2 months:

• keep track of everything you buy, from groceries to a daily cup of coffee
• keep track of bills you pay during this period
• try dividing your expenses into 2 categories: "needs" and "wants"

Small changes to spending habits can have a major impact on your budget and your ability to save.

Evaluate your needs and wants

Knowing the difference between your needs and your wants is key to making a smart budget.

A "need" is something that is necessary, required or essential. For example, a roof over your head, clothing, food, or medication.

A "want" is something that you'd like, but don't necessarily need. For example, meals at a restaurant, a trip, a gym membership, or designer shoes.

How to make a budget

Step 1: List your income, savings and expenses

• take your recent pay stubs, bills, and account statements
• enter the amount of income, savings and expenses into each category
• review the amounts to make sure you didn't forget anything

Step 2: Review your results

Look at the different alerts for each category:

• green thumbs up: this amount is within the average range
• yellow warning sign: this amount is slightly above the average range
• red hand sign: this amount is above the average range

Step 3: Review your next steps

Review personalized suggestions based on your situation. Follow links to useful educational tools and content to improve your budget.

Tips to help you stick to your budget

• keep all your receipts and bills
• limit your spending as much as possible to what's in your budget
• update your budget with any changes, for example, a pay raise or a bill increase
• compare your budget to what you actually spend at the end of each month

Ask yourself the following questions when reviewing:

• are there large differences between your actual spending and your budget?
• which categories have the largest differences?
• are differences due to an unusual situation or is this likely to happen each month?
• can you save enough money to reach your financial goals or pay off your debts?

Managing your budget as a student

Costs to include in your budget

Make sure to include all the costs of student life when making your budget.

Tuition fees

Tuition fees are what you pay your university or college to enroll in their program and attend classes.

Tuition fees may vary depending on:

• your study program
• the school you attend
• the province or territory you're studying in
• your residency status or citizenship
• the number and type of classes you take
• whether you're a part-time or full-time student

Student fees

You'll need to pay student fees such as student union fees and administration fees. The exact fees will depend on your school.

Health insurance

Private health insurance coverage is usually included in student fees. This insurance covers medical and/or dental costs not covered by your provincial or territorial health insurance.

Books and other course materials

To reduce the costs of books and other course materials you may:

• buy used books
• buy textbooks from online retailers at a lower price than the campus bookstore
• get electronic versions of course materials
• check your school library to see if any course material is available to borrow
• sell your used textbooks
• use an older edition of the textbook if possible

Living expenses

Living on campus

Check student residence and meal plan costs on your school's website. Consider living in a shared residence room because shared rooms often cost less than single rooms.

Living off campus

You may choose to live with roommates, family or on your own. Sharing costs while you study could cut your living expenses by thousands of dollars each year.

Remember to consider the cost of food, heat, electricity, internet and tenant's insurance.

Transportation

Consider whether taking public transit is cheaper than driving to school. If you live away from home, most airlines, bus and train companies offer discounts to students.

Entertainment costs

To reduce entertainment costs, focus on what you need instead of what you want. You may be able to save money using student discount cards.

Consider rising costs

Your tuition and living costs may rise each year due to inflation. Remember to include these increases when making your new student budget each year.

Sources of income

Your income may come from personal savings, working while in school, or your parents. To add to your income, also consider:

• scholarships
• grants
• a government student loan
• a student line of credit from your financial institution

Tax deductions and tax credits for students

A tax deduction reduces your taxable income for the year. As a student you may be eligible for deductions for moving expenses and childcare expenses.

A non-refundable tax credit reduces the amount of tax you owe. You may be eligible for credits for:

• tuition fees
• books
• public transit
• interest paid on your student loan

Make sure to file your income tax return on time each year to avoid penalties.

Paying back student debt

Canada Student Loans

If you have a Canada Student Loan, you'll have a 6-month non-repayment period after you:

• finish your final school term
• reduce from full-time to part-time studies
• leave school or take time off school

Provincial student loans

The repayment rules of provincial student loans vary depending on the province or territory where you applied for your loan.

Student lines of credit

If you have a student line of credit, you'll have to pay the interest on the money you borrow while you're still in school.

Student credit cards

The annual interest rate for student credit cards in Canada is around 21%. Credit cards are a very expensive way to borrow if you don't repay the balance in full each month.

Include your payments in your budget

Build your student debt payments into your budget and try making more than the minimum payments. If you have more than one loan, card or line of credit, make sure you know when each payment is due.

How student debt affects your credit score

Student loans and lines of credit form part of your credit history. If you miss or are late with your payments, it can affect your credit score.

A poor credit score can affect your ability to:

• get a job
• rent an apartment
• get more credit

How do I prepare a budget?

Why managing your money is important

Learning how to manage your money can determine what you can do and where you can go in life. The first step on the path to financial success means understanding that you are in control of your financial future.

By developing good money management skills, you can:

• save money
• plan for your future
• pay off your debt
• achieve financial independence
• become a savvy consumer

Steps to create a budget

A budget will help you understand how much money you have coming in and how much money is going out. If the amount going out is more than the amount coming in there is a problem.

Step 1: Add up your monthly income

Money coming in could be:

• income from employment
• an allowance
• interest

Step 2: Add up all your monthly expenses

Fixed expenses

Fixed expenses come up every month and are roughly the same amount. These include:

• housing
• insurance
• utilities
• telecom services like cable or internet

Variable expenses

Variable expenses can change each month. These include:

• groceries
• eating out
• transportation
• clothing
• entertainment

Irregular or periodic expenses

These don't occur every month. These include:

• tuition
• travel
• car repairs
• gifts
• unexpected costs

You can account for irregular expenses by:

• budgeting a set amount every month for unexpected costs
• spreading a known expense like tuition over several months so you have the entire amount saved when you need it

Step 3: Subtract expenses from income

• if you have a surplus, consider starting an emergency fund or making an extra payment on a loan
• if you always have something left over, add a savings category to your budget
• if your expenses are more than your income, you have a deficit and need to cut back on non-essential items

Tracking your expenses

The best way to keep track of expenses is to record them as soon as possible:

• record all purchases, bill payments and savings
• keep receipts and use them to check your bills at the end of the month
• keep track of cash payments

Once you start tracking your spending it's easy to know where your money is going. Then you can make adjustments to your spending habits as needed.

Wants versus needs

An excellent way of reducing expenses is to understand the difference between a want and a need.

• a "want" is something nice to have
• a "need" is something essential

Examples of needs:

• food
• shelter
• clothing
• electricity
• transportation

Examples of wants:

• electronic gadgets
• eating out
• video games
• travel
• sports events and concerts

By identifying your wants and making an effort to reduce spending on these items you will find a more balanced budget.

Ways to reduce your expenses

Whatever your age or income, there are always changes you can make to your spending habits. Small savings add up quickly.

• take advantage of seasonal sales
• shop around and negotiate
• use free services like your local library
• scale back on nice-to-haves
• replace a product when necessary, not because a newer version came out

Dealing with Debt

If you borrow money, borrow only what you can afford to pay back within a reasonable period of time. Managing your debt will help you feel more in control of your finances.

What does your debt really cost you

Part of managing your debt is understanding how you got there. If you could not pay for a purchase in cash and needed to borrow money, the true cost was probably higher than the sticker price because of the interest you paid.

For example, a $2,000 TV bought on credit at 18% interest:

• at $40 per month: true cost is $3,724 and takes 7 years and 10 months to pay off
• at $100 per month: true cost is $2,395 and takes 2 years to pay off
• paid in full immediately: true cost is $2,000

Whatever type of debt you have, remember to pay as much as you can and as often as you can. Additional and frequent payments mean you'll pay off the debt sooner and pay less interest. Regular and on-time payments will also help you maintain a good credit history and credit score.

Government student loans

Government student loans are interest-free while you are enrolled in post-secondary education. They are payable six months after you leave your studies, although interest is accumulated during that time. They may also entitle you to student loan tax credits.

If you are having trouble paying back your student loan, you may be eligible for the Repayment Assistance Plan. The plan allows you to pay back what you can reasonably afford depending on your current situation.

Recognizing debt danger signs

Be on the lookout for signs that you are having trouble with debt:

• using your credit card as a necessity rather than a convenience
• taking out cash advances on credit cards for daily expenses
• continually missing payments
• being near or exceeding the limit on your credit cards
• borrowing from one credit card to pay off another

If any of these apply to you, it may be time to get help managing your debt.

How to take control of your debt

There are many ways to take control of your debt:

• use your savings to pay off debt, especially if you're paying a higher interest rate on your debt than you are earning on your savings
• pay down your highest interest rate debts first to pay less in total interest costs and become debt-free sooner
• switch to less expensive credit cards with lower interest rates or no annual fees
• call creditors to negotiate lower interest rates so more of your payment goes toward the principal
• set up automatic bill payments to stay on schedule and avoid late payments
• leave your credit cards at home and bring cash to avoid impulsive purchases
• stay away from "buy now, pay later" offers as administrative fees and high interest rates will only add to your debt burden

Getting help with debt

You may decide to work with a third party to help you get out of debt. Options include:

Debt consolidation loan

Combines all your debts into a single loan with one monthly payment. If you get a lower interest rate than what you are currently paying, it will reduce your overall interest costs. Note that your debt is not gone, it is just combined into one larger debt.

Credit counselling

A non-profit credit counselling agency will work with you to find the best way to pay off your debt, often through a debt management program paid over several years.

Consumer proposal

You work with a trustee in bankruptcy to prepare a proposal that lets you reduce your debt and pay off the balance gradually. Payments to creditors are made through the trustee.

Bankruptcy

A trustee in bankruptcy will consolidate your assets to try to pay back your creditors. Not all debts are discharged through bankruptcy. For instance, student loans are not discharged until after seven years. All of these options will affect your credit history and credit score, some for several years.

Rebuilding after debt

Once you have taken action to conquer your debt, work at rebuilding your credit rating. It will take time, but it is worth it. Small efforts now will bring big payoffs in the future.

How Do I Live Within My Means

Why small changes matter

It is worth making an effort to reduce your costs. Small changes in your spending habits will result in big savings over time. Living beyond your means can be a costly and sometimes lifelong mistake. By identifying ways to reduce your spending, you can quickly and easily get back on track.

Track your spending

Once you know what you spend and where you spend your money, you can begin to take action to control your expenses.

Try this exercise for one to two months:

• keep track of everything you buy or spend money on, from your daily cup of coffee to groceries, lottery tickets, and gifts
• use an expense recording system that works for you such as a notebook, mobile app, spreadsheet, or software
• ask your financial institution if it has ways to help you categorize your expenses

At the end of a couple of months, you'll get a clear picture of how you're spending your money and where to cut back. Most people who do this exercise are surprised at how much they spend on things like coffee, eating out, and impulsive purchases.

Look for savings

Now that you've recorded and better understand your spending habits, you can look for areas where you may be spending too much. Small savings add up quickly.

1. Check your bills and statements

• look for any errors or overcharges
• read your bills carefully each month
• call your service provider to ask about items or charges you don't recognize
• pay on time every month to avoid costly interest charges

2. Negotiate better plans

• call each of your service providers regularly to ask about your account
• find out how much you're spending on your plans and how you can lower your charges
• shop around to find out what other vendors are offering
• call your provider to see if it will match the competition
• don't be afraid to ask for a discount or a better deal

3. Lower your banking fees

• know your banking options and choose the right banking package
• look for no-cost and low-cost account options
• use the Financial Consumer Agency of Canada's Cost of Banking tools to find the right banking package for you

4. Consider bundling your services

• find out if you can get several services from one provider
• ask if there are discounts for getting all your services with them
• negotiate with the provider
• this usually works well with telecom providers who offer cable, internet, and phone

5. Reduce impulsive spending

• always use a list when you shop and stick to it
• before making any unplanned purchases, ask yourself if you really need the item
• bring only enough cash to buy what you planned to buy
• sleep on it and see if you still want the item the next day

6. Plan ahead

• plan your meals for the week to create your grocery list and encourage you to bring your lunch instead of buying it
• carry a refillable water bottle to avoid buying bottled water or other beverages
• plan your day the night before to prepare coffee at home, pack your lunch, and take public transit

How to cut back on expenses

To find $100 in monthly savings, create a table with the following columns:

• category where you can cut back such as food, transportation, or cell phone plan
• what you would do differently to save money
• daily savings amount
• weekly savings amount
• monthly savings amount

For example, packing a lunch three times a week instead of eating out saves $5 a day, $15 a week, and $60 a month. That adds up to $720 a year from one small change.

Fill in the table for all your spending categories and add up the monthly savings column to reach your goal.

Keys to living within your means

• know what you're spending
• have a plan to cut back
• have some discipline

You will face challenges from time to time, but keep at it and you will see the results in no time.

Saving and Investing

Saving puts you in control. It allows you to have choices in life. And investing gives opportunities to make your money grow.

Why save

The reasons to save are many:

• for a sense of greater security and control
• to be prepared for unexpected events
• to reduce stress
• to provide for a major expense

Whatever your reason, use it as a source of motivation.

Setting savings goals

Research shows that on average Canadians save less than 5% of their income. Ideally you should try to save at least 10% of your income.

To motivate yourself, set savings goals that are specific:

• identify a specific amount you want to save
• identify the period of time it will take to get there
• identify the steps to take to reach your goals

For example, a vague goal is "get rid of my debt and save money." A better goal is "reduce debt by $1,000 and establish an emergency fund of $2,000 over the next eight months by saving $200 every paycheque."

Tips to stay motivated:

• write down your goal to make it more real
• track your progress regularly
• if you are saving for something specific like a trip, keep a picture of your destination on your fridge or in your wallet

Four steps to saving

Savings don't just happen. You have to make an effort and a plan to save.

Step 1: Build an emergency fund

• save the equivalent of at least three to six months of take-home pay
• keep the money in a savings account or an investment that can be easily cashed
• do not touch it unless there is an emergency

Step 2: Pay yourself first

• consider your savings as any other bill you have to pay regularly
• put aside a set amount such as 10% of your take-home pay every paycheque

Step 3: Set up automatic transfers

• set up an automatic transfer of money to a savings account
• this makes saving easier and more consistent

Step 4: Make your money grow

• put your money in savings vehicles that offer the best possible interest rates at a risk level you are comfortable with
• take advantage of compound interest, which is interest paid on both the initial deposit and any interest earned in previous periods
• compound interest helps your money grow faster over time

Ways to grow your savings

Every investment comes with a risk. You may not make any money or you may even lose money. Generally more risky investments have a higher potential return and less risky investments have a lower return.

Before choosing an investment you need to:

• decide how much risk you can handle
• set your investment objectives
• determine when you will need access to the money

There are four major types of investments:

• investments that pay interest such as savings accounts, Canada savings bonds, and guaranteed investment certificates
• shares in a company such as stocks and mutual funds
• property including real estate, precious metals, and art
• direct investment in a business

Savings accounts

You can set up a savings account with a financial institution. Interest rates vary depending on the type of account and the institution. Shop around for the account with the best rates and features for you.

Guaranteed investment certificates (GICs)

• typically guarantee the principal and usually guarantee the return on your investment
• rates and terms vary by GIC type
• a longer term GIC generally pays a higher interest rate
• longer term GICs may limit your access to your money or charge penalties if you withdraw before the term ends

Mutual funds

• pool money from many investors
• a professional fund manager invests the money in various investment products
• you must buy and sell mutual funds through a financial professional or an online brokerage account
• you can generally buy and sell mutual funds at any time
• understand the mix of investments in the fund as well as the fees charged as both will affect your rate of return

Registered savings plans

These plans allow you to save for a specific purpose while offering tax benefits.

Registered Retirement Savings Plan (RRSP)

• helps you save for retirement
• contributions are tax deductible meaning the contribution value can be deducted from your taxable income
• savings can grow tax-free until you withdraw the money

Registered Disability Savings Plan (RDSP)

• helps families save for long-term care of relatives with disabilities
• contributions are not tax deductible but the money in the plan grows tax-free

Registered Education Savings Plan (RESP)

• helps you save for a child's post-secondary education using after-tax dollars
• contributions are not tax deductible but the money in the plan grows tax-free

Tax-Free Savings Account (TFSA)

• contributions are not tax deductible
• any interest you earn on money in the account is not taxable
• you can hold cash, bonds, GICs, stocks, and mutual funds in your TFSA

The three knows

Regardless of where you decide to invest your money, there are three main things you need to know.

Know yourself

• understand your risk tolerance
• understand your investment goals
• understand your timeline

Know your investment

• is it right for you?
• will it help you meet your goals?
• what fees apply?

Know your financial advisor

• make sure the advisor understands your risk tolerance and savings goals
• verify that he or she is qualified to give you investment advice
• ask about the advisor's background and do some research of your own

Key takeaways

• start saving as soon as possible and save regularly
• set specific savings goals to keep yourself motivated
• follow the four steps to saving: build an emergency fund, pay yourself first, set up automatic transfers, and make your money grow
• choose different types of investments that fit within your risk level
• always know yourself, know your investment, and know your financial advisor

How to Protect Yourself from Financial Fraud

Financial fraud can happen to anyone. Be alert and take steps to protect your personal and financial information. Every year Canadians lose millions of dollars to fraudsters. Fraudsters are very creative and come up with new ways to trick you. Technology also makes it easier for fraudsters to contact more people.

Fraudsters are not always strangers. When someone you know asks for personal information or asks you to invest in something that sounds too good to be true, be cautious and don't say yes right away.

Types of fraud

Identity fraud

Identity fraud is when a criminal steals your personal or financial information and tries to use it to:

• access your bank accounts
• open new credit accounts in your name

You may unknowingly provide your personal information to a fraudster over the phone, by email, or on a fake website made to look like a real one.

Phishing

Phishing is when fraudsters send you a legitimate-looking email asking for your personal information or containing a link to a fake website where you are asked to enter your account information.

Phishing emails usually:

• begin with a generic greeting and don't use your real name
• appear to be from a financial institution or large company you may deal with
• refer to a problem with your account
• include a link to what appears to be a legitimate website
• have a sense of urgency

Keep in mind that financial institutions and large companies will never notify you of a problem with your account through an unsolicited email. To check the validity of a link, point to the address with your cursor without clicking to show the URL. If it does not match the address shown in the email it is probably a scam. When in doubt delete the email and contact your financial institution directly.

Vishing

Vishing is when you receive a telephone call or voicemail asking you to provide or confirm personal information.

Warning signs of fraud

No matter what type of scam or how you are contacted, look for these warning signs:

• a stranger or someone you know is asking for personal or financial information to help with a problem
• there is a sense of urgency to get your information or money before you realize it's a scam
• they want you to move large sums of money often through a non-traditional way such as a wire transfer
• they ask you to keep it secret and not tell anyone

Lottery scams

• claim that you've won a prize but you need to send money to receive it
• require you to send money before getting your reward

Money transfer scams

• request that you move money for someone else
• promise big rewards in return

Inheritance scams

• claim that a long-lost relative has died and you will inherit their fortune
• ask you to help with banking fees or transfer of funds before receiving anything

Fraudulent job offers

• bogus job ads offer high pay for little or no work, ask you to do the company's banking, promise wages in cash, and do not provide a company name or address
• identity theft job offers ask for personal information needed by human resources in an attempt to steal your identity
• employment fee scams promise a job but only if you pay a fee for things like supplies or administration

Always remember: if it sounds too good to be true, it probably is.

How to protect your identity and finances

Follow these rules to avoid fraud:

• never open unsolicited email
• never send money before getting any service
• never share your personal information without confirming the source of the request is legitimate
• always protect your passwords and PINs and change them on a regular basis
• only use secure websites when transmitting personal information online — look for addresses starting with "https" or a padlock image on the page
• never share personal information when using a public internet connection such as at an internet café or a library
• keep your computer anti-virus software up to date

What to do if you are a victim of fraud

If you are taken in by a fraud:

• notify your financial institutions as soon as possible
• notify any other companies where your accounts may have been tampered with
• inform Canada's two credit reporting agencies Equifax and TransUnion so they may put a note on your file
• report the incident to the police and the Canadian Anti-Fraud Centre
• keep a written log of all activities, transactions, and interactions including when you first noticed the fraud, what actions you took, and who you communicated with

Don't be embarrassed to admit you fell for a scam. Sharing your experience could save others from the same fate.

Key takeaways

• there are several different types of fraud and new ones are being created every day
• fraudsters try to get you when you are most vulnerable such as when you are looking for a job or dealing with a financial institution
• educate yourself, be alert, and always verify before sharing any personal or financial information

Understanding Credit

Using credit when needed can be a helpful tool if you don't let it get out of control. It's important to pay your bills in full and on time to build a good credit history.

Types of credit

There are several types of credit products available to most Canadians:

• credit cards
• student loans
• car loans
• personal loans
• lines of credit
• mortgages

When you use credit products, credit reporting agencies track how you use them and create a credit report. Credit reporting agencies are private companies that sell credit reports to their members which include banks, credit card companies, and other financial institutions.

Credit reports and credit scores

Credit report

A credit report is a summary of your credit history. Your credit report is created when you borrow money or apply for credit for the first time.

A credit report includes:

• personal information
• dates of account openings and loan applications
• credit balance
• payment history
• how much money you owe
• any debts sent to collection agencies

When you apply for credit, the lender reviews your credit report before approving your application. The lender wants to make sure you have a record of being a good borrower who makes regular payments and pays debts back in full.

Late payments and other information such as personal bankruptcy will stay on your credit report for several years. The length of time varies by credit reporting agency and sometimes by province.

Credit score

A credit score is a three-digit number based on information in your credit report along with other factors. In Canada credit scores range from 300 to 900 points with 900 being the best score.

The main factors used to calculate your credit score include:

• payment history
• use of available credit
• length of credit history
• number of inquiries for your credit report
• having a mix of credit products

You gain points for actions that show lenders you can use credit responsibly. You lose points for things that show you have difficulty managing credit.

Credit reporting agencies

In Canada there are two major credit reporting agencies:

• TransUnion
• Equifax

Both companies provide you with a free copy of your credit report whenever you ask for one. This report does not include your credit score which is a paid service.

To get your free credit report you may order it by:

• mail
• fax
• telephone
• in person

It is important to review your credit report regularly to check for errors or fraud. A simple mistake on your credit report can cause problems when you apply for credit. Review your credit history annually and work out ways to improve your credit score.

A poor credit history could:

• make it harder to get a credit card or a loan
• cause you to pay more to borrow money
• affect your ability to rent housing or get hired for a job

Key facts about credit cards

Grace periods

Each financial institution sets its own grace period. Federally regulated financial institutions require a grace period of at least 21 days. However a lender could choose to have a longer grace period.

Late payments

Regardless of how soon after the due date you pay, a late payment could be recorded on your credit file and stay on your record for several years.

Cash advances

Interest starts adding up on cash advances right away unlike a credit card purchase where you are charged interest only after the grace period has passed unless you are carrying a balance from month to month.

How to avoid problems with credit cards

• pay the balance in full every month to minimize interest charges
• if you cannot pay the balance in full do not make just the minimum payment — pay as much as you can
• pay your balance a few days before the due date to ensure your payment is credited on time
• if you typically carry a balance look for a credit card with a low interest rate
• consider transferring your credit card balance to a line of credit with a lower interest rate
• leave your credit cards at home until your debt is paid off to avoid temptation

The true cost of minimum payments

Using a $1,000 credit card balance at 18% annual interest as an example:

• paying only the minimum monthly payment of $30 takes 10 years to pay off and costs almost $800 in interest
• paying an extra $5 per month for a total of $35 pays off the balance 3 years and 10 months sooner and saves $286 in interest
• paying a fixed $100 per month pays off the debt in less than a year and costs less than $100 in interest

Always pay as much as you can above the minimum payment to reduce the total interest you pay and become debt-free sooner.

Key takeaways

• understand the different types of credit products available to you
• review your credit report annually and check for errors or fraud
• pay your credit card balance in full and on time every month
• know your rights and responsibilities before accepting any form of credit
• use credit responsibly to build and maintain a good credit history

Do You Have a Financial Plan

What is a financial plan

A financial plan is a roadmap to help you manage your finances over the long term so that you can reach your life goals. It is never too early to start planning for your future.

When working on your financial plan, you should ask yourself:

• where am I today?
• where do I want to be?
• how do I get there?

A full financial plan includes:

• the resources you have available
• your debts
• your earning potential
• insurance
• legal commitments
• income taxes
• pensions
• other factors

Difference between a financial plan and a budget

A budget compares your current income with your expenses and helps you manage your spending. A financial plan goes beyond a budget by:

• setting goals for your life and ways to work toward them
• thinking about future earnings
• identifying steps needed to reach your financial goals

Whether your goal is to get out of debt, buy a condo, take a year off work, or save for retirement, your financial plan should always answer where you are, where you want to be, and how to get there.

How a financial plan can help you

A financial plan can help you:

• balance today's needs with your future goals
• make the best use of your financial resources
• manage your taxes and insurance
• stay motivated and save for your needs
• write a will
• plan for short-term and long-term goals

A financial plan is a living document meaning it should be kept up to date. Once you create your plan review it frequently as your life or financial situation may change and have an impact on your goals.

Information needed to prepare a financial plan

Preparing a financial plan is a matter of answering a series of questions:

• what do I want to do?
• what am I starting out with?
• will I have enough money to get where I want to go?

Each question requires you to enter personal and financial information. Once completed your plan will help you:

• calculate your net worth
• identify your monthly income and expenses
• determine what is needed to reach your goals

If you don't have all the information you need when you create your financial plan, enter your best guess and update your plan when you have more accurate information. For more complex financial plans use the services of a certified financial planner.

Calculating your net worth

Your net worth is defined as your assets — what you own — minus your liabilities — what you owe. Calculating your net worth is an important step in your financial plan and should be updated on a regular basis.

Step 1: List all your assets

List all your assets and their monetary value including:

• savings
• investments
• real estate
• motor vehicles
• any other possessions that have a monetary value such as art and collectibles

Add up the total value of your assets at current market prices.

Step 2: List all your debts

List all your debts and their values including:

• credit card balances that you cannot repay within a month
• loans such as car loans and student loans
• balances on a line of credit
• any mortgage balances
• any other debt such as income taxes you haven't paid or money owed to family

Add up the total value of your debts.

Step 3: Calculate your net worth

Subtract your total debts from your total assets.

• a positive number means your assets are greater than your debts
• a negative number means your debts are greater than your assets and you should try to repay them as fast as you can

Key takeaways

• a financial plan is a roadmap to help you reach your life goals
• it goes beyond a budget by looking at the big picture of your financial future
• review and update your financial plan regularly as your life situation changes
• calculating your net worth helps you understand where you are starting from
• stay focused and you will feel rewarded every time you reach one of your life goals

Planning and saving for retirement

Determining how much you need for retirement

The amount you need to save depends on how you want to spend your retirement.

To help you plan, consider:

• your age when you retire
• your hobbies
• your travel plans
• if you'll work after you retire
• if you'll have family members to support financially
• whether you'll have debt to pay such as a mortgage or a loan
• where you want to live during your retirement

If you plan on retiring in another country, other rules and regulations may apply. Taxes, public pensions, and medical care may work differently outside of Canada.

Compare your current spending with expected retirement spending

Think about your lifestyle and look at how much you spend now. Then determine how those expenses may change when you retire. For example:

• you may not have work-related expenses
• you may decide to spend more on hobbies or travel
• you may decide to live in a smaller home or a condo

Decide when you'll retire

When you want to retire has a big impact on how much you need to save. You'll need to make sure you have enough money to support yourself for the entire length of your retirement. Once you know when you'll retire you'll have a better idea of how much and how long you have to save.

When to start saving for retirement

It's never too early to start saving for retirement. Saving early means:

• you may have to save less each month
• your money will have more time to earn a larger amount of compound interest

For example, if you want to save $100,000 for retirement with a 5% annual interest rate:

• with 20 years to save you'll need to save $243 per month
• with only 10 years to save you'll need to save $643 per month

Starting early means you earn significantly more in compound interest over time, reducing how much you need to contribute each month.

How inflation may affect your retirement

Inflation is the rising cost of consumer goods and services. In Canada inflation is measured by the Consumer Price Index which measures changes in the price of over 600 consumer goods and services over time.

Inflation affects your retirement in two ways:

• it will increase the cost of goods and services you buy
• it will reduce the buying power of your savings over time

For example a $100 purchase made in 2013 cost about $129 in 2023. If you plan to retire in 20 years and want to have what $50,000 buys today, assuming a 2.5% annual inflation rate, you'll need $81,900 in 20 years.

Inflation and pension plans

• the Old Age Security (OAS) pension and the Canada Pension Plan (CPP) are protected against inflation, meaning as the cost of living goes up the value of your benefit goes up as well
• not all employer pensions are protected against inflation — contact your pension administrator or employer to learn more about your pension

How to start saving for retirement

Start saving a portion of every paycheque if you can afford it. The earlier you start saving the longer your money can earn interest and grow.

Tips to start saving for retirement:

• set up automatic deposits to transfer a set amount of your pay automatically into a savings account
• consider increasing the amount of the automatic transfer as your pay increases
• adding a small amount on a regular basis can make a big difference in the long term
• talk to your financial institution about registered plans that may help you save for retirement

Balancing your current financial priorities

Saving for retirement can be difficult when you have other demands on your money such as a mortgage, rent, car payments, or student loans. Make a budget to help you figure out how much money you can afford to save for retirement.

How to Create a Budget that Actually Helps You Save Money

Source: RBC Royal Bank

Creating a budget is one of the most effective ways to take control of your finances and start building meaningful savings. By setting clear goals, tracking your spending and following a simple budgeting framework, you can make your money work more effectively for your future.

Why is it important to start saving money and create a budget

Saving money and creating a budget are the cornerstones of financial health and the primary way to help ensure your financial goals come to fruition. No matter what your plans are for the future, saving money and having a budget ready can help get you through any turbulent financial times.

Protect your purchasing power

Inflation can creep up on your financial stability by acting as a hidden tax on your savings. Year to year, on average, one dollar today buys only 98 per cent of what it could just one year ago. If you have $100 in a savings account earning 1% interest but inflation is at 2%, you will need $102 just to maintain your original buying power. A proper plan for your earnings and savings by way of a budget helps close that gap left by rising costs of inflation.

Maintain financial health habits and turn goals into reality

To keep your finances in peak shape and hit those milestones, you need a plan of action that you work at on a daily basis. Much like your physical health, you need to evaluate your choices and make sure they are for the best of your overall financial health and longevity.

Time is your biggest advantage

Time is the most critical factor in saving and earning money through compounding interest. The possibility for exponential growth gets larger with time. You can start at any age — it is never too early and never too late.

For example, assuming an 8% annual return on a $500 monthly investment until age 65:

• starting at age 25 with $240,000 contributed results in a final balance of approximately $1,745,000
• starting at age 35 with $180,000 contributed results in a final balance of approximately $745,000
• starting at age 45 with $120,000 contributed results in a final balance of approximately $295,000

Identifying your savings goals

The first part of creating a roadmap is knowing where you want to go. What are you saving for and how long will it take to achieve these goals.

Short-term goals

Goals to be accomplished within a year such as:

• establishing an emergency fund
• paying off credit card debt
• saving for a vacation

The focus is on liquidity and stability to manage emergencies.

Medium-term goals

Goals usually achievable within a 5-year span such as:

• buying a car
• funding a wedding
• saving for a down payment on a home

Long-term goals

Goals that will matter later in life such as:

• retirement planning
• paying off your mortgage
• saving for a child's post-secondary education

Matching goals to savings vehicles

Matching your money and goals to the right savings vehicles can help in the best way possible:

• short-term goals: High-Interest Savings Account (HISA) — offers safety and liquidity with fast access to cash and zero risk of losing your principal
• medium-term goals: Tax-Free Savings Account (TFSA) — offers tax-free growth with no tax on investment gains and flexible withdrawals for major purchases
• long-term goals: Registered Retirement Savings Plan (RRSP) — lowers your current taxable income and is ideal for long-term compound growth

Consult a financial advisor to tailor savings options to your specific situation.

Tracking your spending

Tracking your spending is one of the healthiest financial habits to have and can help ensure your plans come to fruition.

• monitor the ins and outs of your bank accounts to stay on top of any major errors or redundancies
• review your bank and credit card statements regularly to gain insight into where your money goes most frequently
• use your bank's mobile app and online banking tools to categorize spending habits and spot unusual or unauthorized transactions

How much money should you save each month

Financial experts suggest saving around 15% to 20% of your gross income each month. This way it won't overburden you financially and it can help your savings grow steadily.

The 50/30/20 budgeting rule

The 50/30/20 rule is a simple budgeting framework that divides your after-tax income into three categories:

• 50% for needs
• 30% for wants
• 20% for savings and debt repayment

The percentage division can be flexible depending on factors like family size, income amount and lifestyle. Think of the 50/30/20 split as a baseline and personalize it to fit your situation.

Identify your needs

Needs are what you require to survive:

• food
• rent
• utilities
• transportation
• anything else required for your basic standard of living

Identify your wants

Wants are not essential but provide joy and enrichment:

• entertainment such as concerts, streaming services, and movie theatres
• dining out
• luxury purchases such as clothing accessories, latest gadgets, and high-priced cars
• vacations

Calculating your savings

The 20% dedicated to savings and debt repayment does much of the heavy lifting for your future. This portion is focused on:

• your future financial security
• reaching long-term goals
• building a retirement nest egg
• creating a reliable safety net for emergencies

Budgeting and saving money on a low income

You can enhance your budget plan and save additional money even on a low income through small changes to your usual cash flow:

• set aside a small amount of money from each paycheque — even the cost of a single cup of coffee each week can build your savings over time
• compare chequing accounts to find the ideal set of features that work for you
• consider low-fee bank accounts designed to minimize costs while you build savings
• set up a recurring deposit on payday to put your savings on autopilot before you are tempted to spend
• do an audit of your recurring expenses to identify where you are wasting money
• eliminate paid subscriptions you do not use regularly and look for free alternatives
• call your service providers to negotiate better deals on phone, internet or television
• leverage government benefits available to you such as the Canada Child Benefit, GST/HST credit or provincial supports
• use community resources such as food banks, free community programs and library services
• increase income incrementally by taking on side gigs or seeking professional development for higher-paying roles

Frequently asked questions about saving money

Is it better to save money or pay off debt

Prioritize high-interest debt such as credit cards first, then build an emergency fund in parallel, then tackle lower-interest debt. Always make all minimum debt payments.

How can I save money faster

• increase income through side gigs or asking for raises
• cut unnecessary expenses
• automate savings transfers
• consider high-interest savings accounts

What is the best savings account for beginners

High-Interest Savings Accounts offer higher interest rates and are ideal for building your first emergency fund with easy access when you need funds.

Can I access my TFSA or RRSP in an emergency

• TFSA: yes, you can withdraw anytime with no penalty, but if you have already maxed out your contribution room you cannot recontribute until the following year
• RRSP: yes, but withdrawals are taxed as income and subject to withholding tax of 20 to 30 per cent — treat this as a last resort
• better option: build a separate emergency fund in a flexible savings account to preserve tax-advantaged accounts

How does inflation affect my savings

• inflation erodes purchasing power meaning one dollar today is worth less tomorrow
• keep emergency funds in a flexible savings account earning competitive interest
• for long-term savings consider investments that may outpace inflation such as TFSAs and RRSPs with growth investments
• revisit savings rates annually and adjust if inflation changes significantly

Is it too late to start saving if I am in my 40s or 50s

No it is not too late. Many Canadians reach their peak earning potential in that age range, creating a valuable opportunity to accelerate savings:

• your RRSP contribution room carries forward so large contributions during high-income years can significantly lower your current tax bill
• redirect any new income like bonuses, tax refunds or salary raises straight into long-term savings accounts like a TFSA or RRSP

5 Budgeting Tips for Students Going to a U.S. College

Source: RBC Royal Bank

Whether you're going to a U.S. college for the first time or you are a few years in, your student budget is always a crucial factor in the success and enjoyment of your school year. These five tips can help you set a budget, save money throughout the year, and feel financially secure.

1. Assess the money you'll have available

The first step in setting up your student budget is to take stock of your available cashflow during the school year. Consider all sources of income including:

• money set aside from a summer job
• financial help from parents for tuition or living expenses
• a student loan or line of credit
• scholarships or financial aid from your school or government

If you have a lump sum of money available, break it into equal parts to last you for the time you'll be away, typically eight to nine months.

If you have a student line of credit, plan how you'll use it carefully. Rather than withdrawing money whenever you're short on funds, determine a set amount that you'll pay yourself every month. This way you'll be better prepared to stick to a budget without building the balance higher than needed.

2. List and categorize your expenses

Determine all the costs that will come with your school year and separate them into two categories:

• essentials such as tuition, books, rent, food, cell phone, and transportation
• nice-to-haves including clothing, entertainment, and eating out

Estimate the costs associated with each item to figure out the total of your monthly expenses.

3. Save where you can

As a student money may be tight, so once you've listed your expenses see where you can trim costs.

Books

• consider e-books which are less expensive than physical books
• look for online retailers that offer student discounts

Rent

• try to find affordable housing regardless of where you go to school
• sharing a house with friends or other students is one of the best ways to reduce costs

Food

• if you are not on a meal plan, be thoughtful about your groceries and buy healthy yet inexpensive food
• plan your meals to eliminate food waste and wasted money

Cell phone

• consider getting a U.S. SIM card and plan to pay less to call, text, and stream while studying south of the border
• some providers can help you get a U.S. phone number and plan while still in Canada

Transportation

• try to walk, bike, or take public transit whenever you can
• when assessing housing options consider the potential cost of transportation since living far from campus can offset any savings on rent

4. Take advantage of student deals

Many brands and companies offer deals for students across categories including food, transportation, retail, and technology. When you are out shopping:

• look for signs promoting student savings
• if you don't see a discount advertised, ask if there are any student deals available

5. Pay in U.S. dollars

As a student you cannot afford to pay fees every time you buy something or take out cash from an ATM. Here are ways to reduce foreign exchange, transaction, and ATM fees:

Get a U.S.-based bank account

• while still in Canada open a U.S. bank account and start moving money over from your Canadian account regularly to even out the cost of foreign exchange
• when in the U.S. you can use U.S. cash for purchases and pay bills through online banking in U.S. funds without worrying about exchanging money

Apply for a U.S.-based credit card

• when you use a Canadian credit card in the U.S. you are often charged a foreign transaction fee typically around 2.5% of the amount of your purchase
• these fees can add up significantly on a student budget so a U.S.-based credit card helps avoid them

What is Lifestyle Creep? Signs, Examples and How To Stop It

Source: RBC Royal Bank

Lifestyle creep is often the result of life's natural progression. As families grow, responsibilities shift and everyday expenses rise, the costs that come with them rise too. Recognizing lifestyle creep when it happens can help you feel more confident about your spending, keep your long-term goals on track and reduce money stress.

What is lifestyle creep

Lifestyle creep, sometimes called lifestyle inflation, is the gradual increase in spending that can happen as income rises. Rather than going into savings or toward debt repayment, any extra money you earn is spent on a rising standard of living. Common examples include:

• upgrading to a newer phone
• adding extra streaming subscriptions
• ordering takeout more often on busy weeknights

These additional purchases rarely feel extravagant in the moment. They seem normal for your life stage and often appear to be in line with what everyone around you is doing. Once you get accustomed to them they can be hard to give up. Over time they can add up, making it harder to save more despite earning a higher income.

When does lifestyle creep happen

Lifestyle creep can happen at any age but it tends to take root in midlife. This is not about being careless with money. Rather it is tied to the responsibilities of a stage of life when the financial pressures of running a household, raising a family, caring for aging parents and building a career tend to peak all at once.

More income more responsibilities

Career growth and earning power are often at their highest in midlife but so are expenses. The cost of raising a child in Canada from birth to age 17 is roughly $293,000 and that figure climbs past $350,000 if the child stays at home until age 22. Homes require maintenance, cars need replacing and with time at a premium, conveniences like food delivery and housecleaning start to feel like necessities.

The Canadian cost of living reality

Housing costs in Canada have risen faster than in nearly every other advanced economy. Many Canadians also see lifestyle creep exposed during mortgage renewal when higher interest rates suddenly increase monthly payments. Grocery prices remain a major source of financial stress. Two thirds of Canadians report that the high cost of living is preventing them from taking control of their finances.

Signs of lifestyle creep

Earning more but saving less

You got a raise, made your bonus or moved into a higher paying role but somehow your savings have not grown to match. If more money is coming in but your account balances look the same that is a sign worth paying attention to. This can be especially noticeable after a raise, bonus or mortgage renewal when higher costs or taxes absorb the extra income.

Relying on credit for everyday expenses

If you find yourself relying on credit cards or lines of credit more than usual to cover everyday expenses, take it as a sign that it is a good time to review your budget. According to the Credit Counselling Society's 2026 Consumer Debt Report, 42 per cent of Canadians report using credit instead of cash, up 7 per cent from the previous year.

Feeling financially stuck or anxious

Money stress is not just about how much you earn but also about how much you keep. If you have what should be a comfortable income but you are feeling anxious about the future, experiencing rising debts or not saving as much as you want, it could be time to review your spending habits.

Why recognizing lifestyle creep is important

The impact on retirement and saving

When savings stall or shrink even temporarily the effect on your retirement can compound over time. Growth in accounts like RRSPs and TFSAs depends on consistent contributions over long periods. Even modest regular contributions in your 30s and 40s can outperform larger ones made later because time is one of the most powerful factors in building long-term savings.

The financial stress of lifestyle creep

Beyond the dollars and cents, lifestyle creep can carry a physical and mental health cost. For many Canadians money worries are a greater source of stress than work, personal health or relationships, potentially leading to sleep problems, headaches and lower productivity. Taking simple steps to identify and manage lifestyle creep can help ease this pressure.

Increased reliance on credit

As everyday costs rise it can be natural to lean on credit cards or lines of credit to bridge the gap between income and spending. If your balances are increasing more than you would like, taking a careful look at your spending can help you understand where to cut back.

How to stop lifestyle creep

Pay yourself first

Treat savings like a non-negotiable expense. Set up automatic transfers so that a portion of your income goes into savings or toward debt repayment before you spend anything else. This way saving becomes a natural part of how you manage your money.

Use a budget

Budgeting is simply a way to see where your money is going and whether that spending reflects your priorities. Even a basic monthly review of income versus expenses can reveal patterns that have shifted over time. Budgeting apps both free and paid can help you stay on top of your finances.

Review recurring and invisible expenses

Subscriptions, memberships and convenience services can build gradually over time. They often start small like a free trial that converts to a paid plan or a monthly service that has incrementally increased in price. Set a reminder to review them at least once a year. A useful gut check: would you sign up for this service today if you did not already have it? If the answer is no it may be worth letting it go.

Spend consciously

Conscious spending starts with clarity. When you know what you are saving for, whether it is a comfortable retirement, a dream vacation or your teen's university education, money decisions feel easier and more meaningful. You are no longer asking can I afford this but rather does this move me closer to what I want.

Managing lifestyle creep

Take stock after major life changes

Life transitions like a new job, divorce, big move or child leaving home are natural moments to pause and reassess your financial picture. When your income or responsibilities shift your spending patterns could too. These moments can be a good opportunity to take a fresh look at your spending and make sure it still reflects your priorities.

Decide what is worth the upgrade

Not all spending increases are bad. Some genuinely improve your quality of life or save you meaningful time. The key is to be intentional about which ones earn a place in your budget and which ones can be cut.

Protect savings as earnings grow

When you get a raise, a bonus or a new income stream, a common guideline is to direct at least 50 per cent of it toward savings or debt repayment before increasing spending.

Make financial check-ins routine

Consider building in one or two check-ins a year where you review your savings, your progress toward goals and your spending, subscriptions and memberships. This is a good opportunity to make sure your savings are still on track.

Lifestyle creep does not mean you have failed at managing money

If you recognize lifestyle creep in your own finances you are not alone. Midlife finances are genuinely more complex than they were a generation ago. Housing costs, family responsibilities, unexpected expenses and the rising prices of everyday essentials are real pressures not personal failings. Awareness is the first step. Making small adjustments to how you spend and save can make a real difference over time.

Frequently asked questions about lifestyle creep

What causes lifestyle creep or lifestyle inflation

Lifestyle creep tends to happen when spending gradually rises alongside income. Small lifestyle upgrades, everyday conveniences and the natural evolution of what feels normal to spend all play a role. In Canada external factors like rising housing costs, grocery inflation and increasing childcare expenses can accelerate the effect.

How can I stop lifestyle creep without sacrificing quality of life

Identify which expenses add value to your life and which ones you no longer need. Consider automating your savings so that financial progress happens before discretionary spending and review recurring costs at least once a year.

Can lifestyle creep hurt my retirement savings

Yes. Gradual increases in spending can hinder your ability to save for long-term goals like retirement. Even modest consistent contributions made earlier in life can make a meaningful difference by allowing your investments to compound over time.

What is the first step to managing or preventing lifestyle creep

Awareness is a good first step. Taking a look at your bank and credit card statements from the past few months can help give you a clearer picture of where your money is going. From there even small adjustments to your spending can make a real difference.

Is it okay to still treat yourself sometimes

Yes. Managing lifestyle creep is about balance. The key is to spend your money consciously and within a framework that also supports your long-term goals. When you know your savings and debt repayment are on track, paying for extra things you enjoy becomes something you can feel good about.

How much of a raise should go to savings to avoid lifestyle creep

A common guideline is to direct at least 50 per cent of any raise toward savings or debt repayment before adjusting lifestyle spending.

How to Budget After Job Loss

Source: RBC Royal Bank

Losing a job is never ideal and comes with a slew of emotional ups and downs. An emergency budget is only temporary and is meant to help you manage your expenses until you start earning money again.

What to do if you lose your job

• collect your final pay and severance
• apply for Employment Insurance (EI) immediately
• assess your financial situation and create a budget
• prioritize expenses
• stretch your emergency fund
• increase short-term income while job searching

Collect your final pay and severance

Once your job loss shock wears off, make sure you got everything you are owed. Confirm any final payments your former employer owes you including:

• your last paycheques
• unused sick days or vacation time
• bonuses and commissions
• severance pay

Apply for EI immediately

Apply for EI benefits as soon as possible after losing your job. Delaying could cause you to lose benefits or receive payments long after you need them.

To qualify for EI make sure you obtain all necessary forms from your former employer including:

• your Record of Employment (ROE)
• your T4 slip which reflects the amount of money you were paid for the last calendar year

EI payments usually begin within 28 days of applying if you qualify and submit your Record of Employment on time. You can earn part-time income while receiving EI but your benefits may be reduced based on your earnings.

Assess your financial situation and create a budget

Adjust your budget to align with your new economic reality. Unemployment makes it important to spend only what you have and to track every dollar carefully.

Prioritize expenses

Group your expenses into essentials and non-essentials:

• essentials to prioritize include housing, groceries, utilities, and transportation
• non-essentials should be postponed or eliminated
• when it comes to paying back debt stick to making minimum payments until you find a new job

Financial support options

Lenders and creditors may be more understanding than you think especially if you contact them early and have a good record of repayment. Options that may be available include:

• payment deferrals on mortgages and loans
• financial planning support
• refinancing your loans
• temporarily postponing student loan payments

Contact your financial institution early to discuss what hardship programs may be available to you.

Stretch your emergency fund

Your emergency fund should give you three to nine months of breathing room. To make it last as long as possible:

• examine all remaining income coming your way including pending salary payments, bonuses, insurance payments, and EI
• review your credit card statements and identify regular expenses you can pause or eliminate
• make minimum balance payments on credit cards and try to negotiate a better interest rate
• pause contributions to investment or retirement accounts and redirect those funds toward essential expenses

These moves are only temporary and can be reversed once you are back to earning a steady income.

Increase short-term income while job searching

You may need to find part-time or temporary work while continuing to search for your next full-time role. Short-term income can come from:

• part-time work
• freelance opportunities
• one-off or contract work

What happens to benefits and insurance after job loss

There is often a grace period after losing your job during which you can still use remaining employee benefits and insurance. Find out immediately what those remaining amounts are and use them before they expire. Then consider:

• getting private insurance coverage
• joining your spouse's insurance and benefits plan

Should you keep saving or investing after losing your job

Focus on your essentials. Any expenses that are not absolute necessities should be cancelled or paused including investing. Make sure you understand all the rules and regulations associated with your investments and avoid making hasty decisions that could negatively impact your growth potential or subject you to higher taxes or fees.

Will job loss affect taxes

Severance and EI benefits are taxable. While your employer likely withheld taxes from your paycheques, you may now need to start calculating tax payments on your severance and EI benefits.

How to prepare financially if you think a layoff is coming

• build a short-term cash buffer
• keep a close eye on expenses like subscriptions and memberships
• avoid taking on new debt until you are back to earning a steady income
• choose preparation over panic

Common financial mistakes to avoid after job loss

• cashing out RRSPs too quickly could cause you to miss out on greater tax advantages and incentives
• missing or ignoring monthly bills and avoiding creditors could land you in a negative borrowing spiral
• taking on high-interest debt to cover expenses can make your situation worse in the long run

Job loss checklist: what to do in the first week

Day 1: Process the news and breathe

Losing your job can be difficult and it is perfectly normal to feel shocked, confused and disheartened. Take time to adjust and reflect on your new situation. Sleep in, eat well and try to exercise when you are up for it. Consider telling your loved ones and a few close friends so they know to check in.

Day 2: Apply for EI and review severance

Apply for EI and review your severance package. Registering can take some time so get to it immediately to ensure your claims are processed on time and you are not waiting too long for your first EI payment.

Day 3: Review bills and due dates

• go through your monthly expenses and prioritize bills like rent, mortgage payments and utilities
• pause or cancel subscription payments and memberships
• if possible negotiate lower interest rates on any credit products or services you have
• set up banking alerts to monitor your account activity

Day 4: Update your resume and LinkedIn profile

• make sure your resume and LinkedIn profile are up to date
• solicit former supervisors and colleagues for recommendations, introductions and endorsements
• consult the Government of Canada's job bank for practical resume tools and tips

Day 5: Review your insurance and benefits

• go over your insurance and benefits to know exactly what you are covered for and how long coverage will last
• in cases of layoffs employers will often try to extend health benefits like vision and dental care to recently laid off employees

Frequently asked questions about budgeting after job loss

What bills should I pay first after job loss

Following a job loss prioritize paying your rent or mortgage, utilities and insurance and making minimum debt payments.

Should I use my emergency fund after a layoff

Yes. Emergency funds are meant to provide you with anywhere from three to nine months of breathing room following a layoff or similar major life change.

How long can I survive financially without a job

It depends on your lifestyle and saving and spending habits. Plan for about six months of unemployment following a job loss and reduce your spending to allow your savings to last as long as possible.

How soon after losing my job should I apply for EI

Apply for EI immediately after losing your job. Setting up EI as soon as you are let go will ensure the process is in motion so you can divert your attention to looking for work.

Can I work while receiving EI

Yes. You can earn part-time income while receiving EI but your benefits may be reduced based on your earnings.

How long does EI take to start

EI payments usually begin within 28 days of applying if you qualify and submit your Record of Employment on time.

What You Need to Know About Student Lines of Credit in Canada

Source: RBC Royal Bank

Paying for post-secondary education can be challenging, especially when savings and part-time work are not enough to cover tuition and living costs. A student line of credit can help bridge the gap.

What is a student line of credit

A student line of credit is a flexible pool of money you can use when you need it. Unlike a traditional loan where you get a lump sum all at once, a line of credit gives you a previously approved credit limit that stays in the background. You only take out what you actually need and you only pay interest on the amount you have actually used. As you pay back what you have borrowed your available balance becomes available again.

How does a student line of credit work

• credit limit: the maximum amount you can borrow
• interest: charged only on the amount you use
• flexible access: borrow, repay, and borrow again within your limit
• payments while in school: usually interest-only

Difference between a student loan and a student line of credit in Canada

In Canada student loans and student lines of credit serve different purposes. Student loans are government-funded whereas student lines of credit are offered by banks. Most students use both — government loans first then a line of credit to fill in gaps.

Government student loans:

• interest is often none while in school
• fixed amount provided at one time
• structured repayment
• best for core funding

Student line of credit from a bank:

• interest is charged on amounts used
• borrow as needed within approved credit limit
• flexible repayment with structured requirements once converted to repayment status
• best for covering gaps

How to apply for a student line of credit

To apply you will need to provide:

• proof of enrollment
• estimated education costs
• list of financial resources such as RESPs and scholarships

Is a co-applicant needed

You might need a co-applicant if you have limited or no credit history or if you are studying outside of Canada. If you are an international student studying in Canada the co-applicant must be a Canadian citizen or permanent resident. If you have a co-applicant they will also be responsible for repayment.

Understanding co-applicants

Who can be your co-applicant

Your co-applicant needs to be a Canadian resident aged 18 or older with strong financial standing. Banks look for:

• a good credit score
• stable income
• a clean credit history with no recent bankruptcies or major late payments

They will be asked to provide recent pay stubs, T4 slips from the past two years or a letter of employment.

How does this affect your co-applicant's credit

• the loan appears on the co-applicant's credit report right away as if they borrowed the money themselves
• making on-time payments helps build your credit score while maintaining or improving your co-applicant's score
• the loan increases their debt-to-income ratio which could affect their ability to get approved for their own mortgage, car loan or credit card in the future
• if their credit utilization ratio is above 35 per cent of available credit their score could lower even before anyone misses a payment
• any late or missed payments will damage their credit score as much as yours

What if you cannot find a co-applicant

If you cannot find a co-applicant you still have options including:

• Canada Student Loans program
• provincial options like OSAP in Ontario
• these government programs offer interest-free loans and grants that do not require a co-applicant

What are the borrowing limits for a student line of credit

Borrowing limits are determined based on your program of study, eligibility and financial needs:

• undergraduate, graduate, college or trade school: flexible limits starting at $5,000
• professional programs such as law, MBA and engineering: higher limits based on program of study ranging from $5,000 to $140,000
• medical and dental programs: limits up to $400,000 based on program of study and associated costs

What can a student line of credit be used for

• tuition and fees
• textbooks and supplies
• rent and living expenses
• transportation and travel
• unexpected daily living expenses

Grace period and repayment

Payments while in school

While you are in school you are typically required to make interest-only payments. This helps keep your monthly payments lower while you are studying.

After graduation

After graduation there is a 24-month grace period before you have to start paying back the principal and the interest. This gives you two years to get settled into your career before full payments start. You can repay early at any time without penalty which can help reduce total borrowing costs.

Note that the 24-month grace period does not apply to students in medical or dental programs.

Interest rates

Student lines of credit offer variable interest rates that fluctuate as the prime rate changes. The interest rate is usually lower than credit cards but higher than government loans.

What to consider before applying

• only borrow what you need
• use your government loan first and then use your line of credit as a backup
• consider adding repayments to your monthly budget
• make small payments early if you can

Questions to ask before applying

About costs

• what is the interest rate and is it fixed or variable?
• when does interest start and do I pay interest while in school?
• what happens if I miss a payment?

About flexibility

• can I borrow as I need it or is it a one-time amount?
• can I pay it back faster without penalties?
• what is my grace period after graduation?
• what happens if I take a break from school or switch programs?

About requirements

• do I need a co-signer and what does that mean for them?
• what credit score or credit history do I need?
• what documentation do I need to apply?
• how long does approval take?

About the fine print

• are there any conditions or requirements to maintain the line of credit?
• what can I use the money for and are there restrictions?
• how will this affect my credit score?
• what are my options if I run into financial trouble?

Tips on qualifying for a student line of credit

Start your application early

Getting approved is not just about meeting basic requirements. Send your application before the deadline to give yourself breathing room for approval and activation. Starting early means you can gather documents without rushing and address any potential roadblocks before school bills arrive.

Understand your program's qualification requirements

Your field of study directly affects your credit limit and interest rate. Knowing which category you fall into helps set realistic expectations and allows you to prepare the correct documentation.

Have your documentation ready

Have your proof of enrollment ready along with a detailed budget that demonstrates your need for the line of credit. If you are working while studying gather your last two years of T4 slips or a recent employment letter and pay stub.

Build your credit profile before applying

• make every payment on time
• keep your balances low
• avoid maxing out your limits
• set up autopay or monthly reminders of upcoming deadlines

Consider finding a qualified co-applicant

A co-applicant with dependable income and credit can boost your chances of approval especially if your credit history is limited or you are studying outside of Canada.

Keep your accounts in good standing

Your line of credit account must remain in good standing throughout the process with no missed payments, delinquent status or account holds.

How to calculate your student loan repayment timeline

Start with what you owe

Add up your student line of credit balance plus any government student loans you are carrying.

Know your interest rate

This provides a clearer picture of where you stand with your debts.

Understand your grace period

You pay only interest during the grace period after graduation, not principal, giving you space to settle into your career.

Plan your repayment

Use a loan calculator and plug in your balance, interest rate and desired monthly payment to see exactly when you will be debt-free.

Frequently asked questions

Is a student line of credit better than a government student loan in Canada

Each serves a different purpose. Government student loans are given in one lump sum and may include grants with structured repayment schedules. A line of credit from a bank is more flexible but accrues interest immediately. Most students use both.

Do you have to make payments on a student line of credit while in school

Yes but only interest payments on the amount you have actually used. This keeps your monthly costs lower while you are studying though it does not reduce the total amount you owe.

How much can I borrow with a student line of credit

It depends on what you are studying and your financial situation. For most general programs limits start around $5,000. For professional fields like medicine or dentistry limits can go as high as $350,000 to $400,000.

What credit score do I need to qualify

Many lenders look for a good credit score to mitigate risk. However if you have a qualified co-applicant with a good credit score this can significantly improve your chances even if your own credit history is limited.

When should I choose a student line of credit over government loans or savings

Consider a line of credit if you do not qualify for a government student loan, if a government loan will not cover all of your costs, if you have not been able to save, or if you are not able to work part-time during school. A line of credit may be particularly helpful for students in programs with higher-than-average tuition fees or longer study periods.

Travelling on a Budget: How to Save Money on Travel to the U.S.

Source: RBC Royal Bank

For many Canadians the United States offers idyllic beach getaways, big-city flair and exceptional cultural experiences just a short hop away. Smart planning can make your next U.S. getaway more affordable than you might think.

1. Time it right

If you are flexible in your vacation scheduling there are a few ways to save big on the destinations you are most excited about.

Budget-friendly beach getaways

Consider heading south a little sooner or later than most to avoid peak pricing. While the weather is not always as warm in January or early February it is also not as busy, and flights and hotel prices tend to be considerably lower.

Examples of off-peak savings:

• in Miami hotel rates drop by nearly half in September compared to March while the weather is actually warmer with average highs around 31°C versus 26°C
• in Maui you will pay about 13% more for a hotel in January than in March while both months are a comfortable 28°C
• in San Diego and Santa Monica temperatures are a pleasant 23°C in October while hotel prices are 30 to 50% lower than the summer rush

Theme park adventures on a budget

Riding rollercoasters and exploring attractions can be done any time of year. Research off-peak times for the park of your choice to find short wait times and lower prices for your family adventure.

City trips on a budget

The big cities of the U.S. offer history, exceptional restaurants and world-renowned attractions but peak times can get expensive. Plan to visit during off-seasons to save money:

• skip Chicago in July if you do not love heat and crowds — September or early October gives you crisp skies, thinning hotel prices and fewer crowds
• visit Los Angeles in May or October when it is cool enough to enjoy hiking and beach walks without the summer hotel frenzy
• New York City in winter will be chilly but you will find cheaper Broadway tickets, easier museum access and better chances at restaurant reservations
• late May and October are sweet spots for San Francisco with clear skies, mild temperatures and reasonable hotel prices — January through March offers deep discounts but also rain and fog

2. Road trip it

The U.S. is an appealing destination for Canadians partly because of proximity. Even with currency conversion the cost of gas south of the border is 20 to 40% less per gallon making driving an attractive option especially for border states or popular road trip corridors. Figure out how far you are willing to drive and map out what you can reach by car.

3. Use perks, discounts and deals

If you are willing to do some research there are travel deals and discounts to be found. Hotels, rental car companies and airlines aim to attract eager travellers.

Useful tools for finding budget travel deals:

• Skyscanner lets you search round-trip, one-way or flexible destination flights which helps if you are open on where to go
• Travelocity and Expedia search for fares, hotels and car rentals based on price and availability
• Kayak lets you search several travel sites at once for the best deal and has an alert service that notifies you when prices drop

4. Use your rewards points

Rewards points are meant to be used. Many programs now let you use points not just for flights but also for:

• hotel stays
• gear and electronics for your road trip
• paying down your credit card balance with points earned on travel

Use your points flexibility to your advantage and make your travel budget stretch further.

5. Pack a U.S. credit and debit card

The right banking tools can help you save while you travel. A U.S.-based credit card lets you avoid foreign transaction fees which can run up to 2.5% of the price of your purchase. With certain cards you can also earn rewards and enjoy travel and purchase protection.

Key takeaways

Travelling on a budget does not mean scaling back your experience — it is about being intentional about your decisions:

• travel during shoulder seasons to save significantly on hotels and flights
• take advantage of lower U.S. gas prices on a road trip
• use travel deal sites to compare prices and set price alerts
• cash in rewards points to stretch your travel budget further
• use a U.S.-based credit card to avoid foreign transaction fees
• with a bit of flexibility and creativity you can make every dollar and every getaway count

7 Tips for Coping With Financial Stress

Source: RBC Royal Bank

Many Canadians experience financial stress at points in their lives especially during volatile economic times with rising costs of living. Research suggests that money worries increase levels of psychological distress which can impact both physical and mental health. Those who feel financial strain are twice as likely to report poor health and four times more likely to suffer from headaches, sleep problems and other illnesses.

Fortunately there are strategies that can help alleviate money-related anxiety and put you on the path toward greater financial stability.

1. Get to the root cause of your financial stress

Financial hardship often comes with shame that can prevent you from doing a deep dive into your finances. But it is important to have a clear understanding of your current situation to determine why you are feeling the way you do.

Common sources of financial stress include:

• the increased cost of living including rising grocery prices and inflation
• climbing housing prices and rents especially for younger generations
• a recent job loss
• a mortgage renewal at a higher rate
• an unexpected expense

Identifying what behaviours or circumstances are making you feel stressed can help you move forward with a plan.

2. Create a budget

Building a budget is critical to finding financial peace. Review your expenses against your income and allocate funds in this order:

• first allocate funds to essential spending such as housing, utilities, groceries and necessary daily expenses
• then see how much you have left for other expenses and prioritize based on what matters most to you
• use the remaining amount to work toward savings and paying down debt

The 50/30/20 rule

One popular budgeting strategy divides your paycheque into three categories:

• 50% toward your basic needs
• 30% toward discretionary spending such as trips, entertainment and streaming services — this is the category to cut first if your basic needs and debt exceed your income
• 20% toward savings and paying down debt — the less debt you have the more of this can go toward savings goals like retirement, home ownership or education

3. Consider debt consolidation

Debt can be a major source of stress so you may want to prioritize paying off your loans. Options to explore include:

• reaching out to your financial institution or credit card company to ask about payment plans or debt consolidation options
• merging mortgage and line-of-credit debt into one payment potentially at a lower interest rate which could free up cash flow
• making interest-only payments temporarily if you are going through hardship
• skipping payments temporarily if you have lost a job or are facing unusual circumstances

Maintain honest and open communication with your financial institution. The more you can do to push yourself in the right direction toward lowering debt the easier it will be to deal with financial stress.

4. Find new sources of income

If you need more cash consider finding ways to make more money. Options include:

• delivery driving
• selling something you have created
• tutoring in a subject you excel at
• setting up an e-commerce store
• using social media to promote your skills or products

Getting started does not need to be difficult and even a small amount of extra income can help reduce financial pressure.

5. Set up an emergency fund

Financial stress often occurs when an emergency happens and you have to spend a lot of cash or take on debt to cover an unexpected expense. An emergency fund gives you a pool of money to use in a pinch for situations such as:

• buying a new car after an old one breaks down
• paying for an unplanned home repair
• covering costs related to being off work for an extended period

How much to save depends on your income, expenses and household situation but many experts suggest setting aside enough to cover six months of costs. The most important thing is to start saving something. Automatically deposit a small amount from each paycheque into a dedicated account so you can rest easier knowing you have a cushion for tough times.

6. Seek professional financial advice

Financial advisors can work with you to:

• create a budget
• set up an emergency fund
• offer educational resources and expense tracking help
• provide emotional support during difficult financial times
• help you rebuild after experiencing financial stress

Advisor services have evolved significantly and now go beyond investing to act as a sounding board for all your financial needs. Find an advisor you trust and who has experience helping people deal with financial challenges.

7. Practice self-care and stress management

Taking care of yourself is an important part of managing financial stress:

• go for walks to de-stress
• meet up with friends or family
• take up meditation or other relaxation practices
• pursue hobbies that take your mind off your finances
• sleep on any big financial decisions before acting
• watch your mood as it can impact how you handle financial pressure and make decisions

Having a support network you can talk to — whether an advisor or trusted family and friends — has been shown to help people deal with stress.

Key takeaways

Financial stress may be challenging to deal with but it is something many people go through at some point in their lives. The key is knowing how to manage and overcome it:

• identify the root cause of your financial stress
• build a budget using a framework like the 50/30/20 rule
• explore debt consolidation options if your debt feels overwhelming
• look for new sources of income to supplement your earnings
• build an emergency fund even if you start small
• seek professional financial advice for personalized support
• take care of your physical and mental health throughout the process

Your Money Journey: A Starting Point for Young People

Source: RBC Royal Bank

Starting your financial journey can feel like juggling student loans, rent, groceries and a little fun money if there is anything left. Balancing your quest for financial independence with the realities of financial responsibilities is not easy but it is doable.

1. Make room for the things you need and the things you want

Managing your money starts with making space for the essentials, a bit of fun and your future. One common approach is the 50/30/20 rule:

• 50% of your income goes to essentials such as debt repayment, rent and groceries
• 30% goes to wants such as a night out, new sneakers or a phone upgrade
• 20% goes to savings for both short-term and long-term goals

You may need to tweak this breakdown depending on your specific situation but the key is to set some benchmarks so you can get the most out of the money you earn.

2. Make a plan for your debt repayment

Whether you owe money on student loans or are carrying a credit card balance it is important to have a plan for paying it down. The longer debt hangs around the more interest you end up paying and that is money you could use for other things.

Basic steps for paying down debt:

• cover minimum payments first
• focus on paying off high-interest debts like credit cards
• once that is handled tackle lower-interest debts like student loans

3. Take advantage of the gig economy

If making ends meet is a struggle think about ways you can boost your income with a side hustle. Whether it is as a rideshare driver, tutor, dog walker, babysitter or freelancer a bit of cash on the side can help bridge financial gaps. Just remember to balance your side hustle with self-care to avoid burnout.

4. Set financial goals

Goals can give you something to aim for which can help you stay diligent with your savings. Having a clear picture of what you are working toward — whether it is paying off debt, building an emergency fund or saving for a trip — keeps you motivated and on track.

5. Live within your means

It is natural to feel a pang of envy when you see flashy posts on social media but remember most people do not post about their struggles. Living within your means provides a freedom that those living with long-term debt cannot enjoy:

• you will reduce financial stress
• you will sleep better
• you will eventually have money to spend on the things that are truly important to you

Do not try to keep up with what you see on social media. Appearances can be deceiving and living beyond your means to match others comes at a real financial cost.

6. Use money hacks

Keeping up with bills, loan repayments and savings can feel overwhelming but automation makes it much easier:

• set up automatic payments to a loan, credit card or savings account by choosing an amount, frequency and timeline — the money is withdrawn directly from your account without you having to think about it
• set up automatic bill payments with your cell phone or utility companies so you never miss a due date
• if your employer offers RRSP matching sign up — this is essentially free money to grow your future

7. Talk to someone

There is a misconception that you need to have a chunk of money or lots of investments before you can talk to a financial advisor. That is not true. Think of a financial professional as your money coach — they are here to help you create a plan and cheer you on. Talking through your challenges is one of the best ways to come out on the other side of them.

Key takeaways

• use the 50/30/20 rule as a starting framework for your budget
• have a clear debt repayment plan and tackle high-interest debt first
• consider a side hustle to bridge financial gaps
• set specific financial goals to stay motivated
• live within your means and do not compare yourself to others on social media
• automate your payments and savings to make good habits effortless
• do not hesitate to speak with a financial advisor no matter where you are starting from

Your Money Journey: Real Talk from Young Canadians

Source: RBC Royal Bank - The Drive Video Series

Overview

Three young Canadians share their honest thoughts on money, financial goals and what it really takes to get ahead — from a first-year university student to a homeowner entrepreneur.

What Keeps Young People Up at Night

When asked what keeps them up at night the answer was immediate: money. Common feelings among young people include:

• knowing what you want but not knowing what steps to take
• financial knowledge being largely self-taught from the internet
• uncertainty about the future especially in early university years
• feeling like big goals like home ownership are impossible

What Young People Are Learning on Their Own

Many young people are picking up financial knowledge independently including:

• building an emergency fund
• maximizing their TFSA
• learning about investments early to work toward early retirement
• researching real estate and home buying on the fly

What Financial Goals Really Mean to Young People

When asked about financial goals the responses went beyond personal wealth:

• taking care of parents and making sure they do not worry about mortgage payments
• building opportunities for the people around them
• providing experiences for family such as travel and religious pilgrimages
• achieving safety and security for loved ones

The Reality of Budgeting as a Young Person

One participant described her budget as a basic Excel spreadsheet where she tracks every purchase — and often goes into the negative. The honest takeaway:

• many young people feel they are their own worst enemy when it comes to spending
• budgeting is something most people are figuring out as they go
• uncertainty can feel unmotivating especially in early stages of life

What Separates Those Who Achieve Goals from Those Who Don't

A key insight from a young homeowner who bought their first house:

• many people say they want to achieve big goals but do not take any action
• priorities matter — if something is important enough people find a way to make it happen
• it is not about having the money it is about deciding what you value most

How Home Ownership Changed Their Lifestyle

The young homeowner described their lifestyle shift simply:

• being a boring person helps a lot
• focusing on work, going to the gym and eating meals at home makes everything easier
• discipline is the real foundation of financial progress
• doing the unglamorous things consistently leads to results

Key Takeaways for Young People Starting Out

• financial literacy is largely self-taught so start learning early from reliable sources
• maximize registered accounts like your TFSA as early as possible
• define what your financial goals really mean to you — they may be about more than just yourself
• taking action matters more than having all the answers
• living simply and with discipline makes big financial goals achievable
• it is okay to start small and feel uncertain — everyone is figuring it out

3 Steps to Prepare for Retirement Amid Cost-of-Living Crunch

Source: RBC Royal Bank

Retirement is fast approaching for one in five people in Canada between the ages of 55 and 64. The high cost of living is taking a toll on would-be retirees and many are finding themselves also supporting younger family members who are struggling to keep up with their bills.

A recent RBC poll found that one in five grandparents aged 55 and over are currently supporting at least one adult child aged 25 and over. Three in ten have gifted money to their grandchildren. Over half are providing financial support at least monthly and more than half are providing more money due to rising costs.

Step 1: Review your finances

It is crucial to sit down with a financial advisor to get a clear picture of your financial situation. Only about two in five grandparents surveyed said they had reviewed their finances to see how much financial support for younger family members they could actually afford to provide.

An advisor can review your investments and portfolio and help you explore your options. Only once you have that knowledge can you think about what strategies to put in place to ensure you are on the right track.

Options to consider if you have a savings shortfall

• delay your retirement
• continue to work part-time
• scale back on the retirement lifestyle you have pictured

If you are already retired and supporting adult children or grandchildren:

• have open and honest conversations with family members early and often
• include an advisor in those conversations
• set clear expectations to ensure your financial support does not overstrain your own resources

Step 2: Refine your decision-making skills

You can stay on track toward your financial goals by identifying thoughts, emotions or habits that may be steering you off course. The field of behavioural economics sheds light on how people tend to base decisions on intuition and emotions rather than facts and analysis.

Common decision-making biases to watch for

Anchoring bias

The tendency to stick to first impressions and rely more heavily on information received early on even if it is less reliable.

Present bias

The tendency to focus on the here and now and place more value on smaller immediate rewards than a potentially greater reward in the future. For example preferring $100 today over $150 in a week.

Status quo bias

The tendency to stick with your current situation rather than make a change even when a change might benefit you.

Loss aversion

The inclination to feel the pain of losses as more powerful than the pleasure of similar gains. For example it may feel better to avoid losing $10 than to find $10.

Regret aversion

The tendency to avoid making a decision today that you might regret in the future often by imagining and preparing for worst-case scenarios.

How to improve your decision-making

• improve your financial literacy
• get professional and clear-headed advice from an advisor
• take the emotion out of investing
• use advice-based conversations to understand what may be driving your choices off course

Step 3: Make a multi-part plan

If you are nearing retirement put a plan in place that covers three time horizons using a bucketing strategy.

The bucketing strategy

The bucketing strategy separates your portfolio and investments into three main time horizons:

Bucket 1: Short-term or cash bucket (1 to 5 years)

• designed to provide income for your immediate basic living and lifestyle needs
• made up of savings, cash-like and short-term investments such as short-term GICs and money market funds
• conservative in nature to help protect you from market fluctuations
• delivers monthly cash flow

Bucket 2: Medium-term bucket (6 to 10 years)

• serves as a buffer between the short-term and long-term buckets
• holds income-generating investments such as fixed income mutual funds that make quarterly distributions and equity mutual funds that pay regular dividends
• can be drawn from to top up the short-term bucket or to deal with unexpected expenses

Bucket 3: Long-term bucket (10 or more years)

• holds potentially higher-risk investments with higher potential for capital growth
• sustains the portfolio for the longer years of retirement
• with a 10-year-plus horizon it may cover more than a full economic cycle giving the portfolio time to recover from most down markets

Key questions to build your bucketing strategy

How much annual income will you need from your retirement portfolio

This will vary depending on your lifestyle and will change over the course of your retirement. Keep track of your spending including any support you give to adult children and grandchildren.

How many years of cash flow do you want readily available

A good plan has contingencies such as an emergency fund for unexpected challenges. Planning for just-in-case scenarios puts a buffer in place to protect your income.

What are your goals in retirement and when do you want to achieve them

Revisit the bucketing strategy regularly to ensure it incorporates any changes in your life, your goals and the broader markets and economy. Sit down annually with an advisor for a financial health checkup to ensure your plan is delivering what you need.

Key takeaways

• review your finances with an advisor to understand exactly where you stand
• be aware of emotional biases that can steer your financial decisions off course
• use the bucketing strategy to plan for short-term, medium-term and long-term needs in retirement
• have open conversations with family members about the financial support you can realistically provide
• revisit your plan regularly and adjust as your life circumstances change

Paying Yourself: How Pre-Authorized Contributions Can Help You Save

Source: RBC Royal Bank

The phrase "pay yourself first" has been around for over a century and has serious staying power. The principle suggests that a portion of every paycheque should go toward saving for your future before you spend on anything else. Today it is easier than ever to do this automatically through pre-authorized contributions.

What is a pre-authorized contribution

A pre-authorized contribution (PAC) is an automatic deposit similar to an automatic bill payment — except instead of paying a utility company you are paying your future. Your savings or investments are automatically deducted from your account on a pre-determined schedule and deposited to an account of your choice.

You can set up a PAC to contribute to:

• RRSP (Registered Retirement Savings Plan)
• TFSA (Tax-Free Savings Account)
• RESP (Registered Education Savings Plan)
• FHSA (First Home Savings Account)
• non-registered investment accounts

The contribution generally comes from your chequing or savings account. Once set up the funds are transferred automatically without any additional effort. You decide how much and how often the money is transferred and you can stop, restart or modify your PAC at any time.

Benefits of a pre-authorized contribution

A PAC frees up your time

A PAC is automatic so you do not have to remember or stress about saving every time a paycheque hits your account. It acts like a personal savings assistant that keeps you on top of your goals without requiring ongoing effort.

A PAC gives you control over how you invest

When you set up your PAC you choose your investment account and the types of assets you invest in. With the help of a financial advisor you can determine investment options that match your financial goals, risk tolerance and time horizon. Options include mutual funds, GICs and more.

A PAC harnesses the power of compounding

Regular contributions to investments mean you earn money on your initial deposit AND on the money your earnings have generated. This is the power of compounding and it works regardless of how big or small your regular contribution is.

For example:

• initial investment of $1,000 at 4% annual return = $1,040 after year one
• after year two at 4% return on $1,040 = $1,081.60
• add a monthly PAC of $50 to that initial $1,000 investment and after two years you have approximately $2,330
• not only have you saved more but the interest earned is also greater

A PAC may help lower the overall cost of your investments

PACs allow you to take advantage of dollar-cost averaging — a strategy that helps you average out the price of your investments over time. By putting a fixed dollar amount toward your investment on a regular basis:

• the price of shares you purchase goes up some months when markets are up
• the price goes down during others when markets are down
• over time you average out the cost rather than trying to time the market
• dollar-cost averaging helps you focus on time in the market not timing the market

A PAC takes the emotion out of saving and investing

Fear, anxiety and excitement can all influence financial decisions and cause you to react to headlines and market fluctuations. When your contributions are automated and scheduled you can focus on your long-term goal rather than on whether markets are up or down on any given day.

How to start a PAC

To set up a pre-authorized contribution you need an investment account. Once you have an account you can set up your PAC through:

• online banking
• your banking mobile app
• your bank branch or advisor

A financial advisor can help you determine which investments and accounts are right for your goals based on your cash flow, risk tolerance and financial goals.

How much can I save with a PAC

The amount you can save depends on your contribution amount, frequency and expected rate of return. For example if you are saving for a home down payment you can use a savings calculator to determine how much you need to set aside each month to reach your goal.

Keep in mind that certain registered accounts have annual or lifetime contribution limits that may affect how much you can put aside each year.

Key takeaways

• paying yourself first means setting aside savings before spending on anything else
• a PAC automates this process making saving effortless and consistent
• the power of compounding means even small regular contributions grow significantly over time
• dollar-cost averaging through a PAC reduces the risk of trying to time the market
• automation takes emotion out of the equation and keeps you focused on long-term goals
• speak with a financial advisor to find the right investment accounts and contribution amounts for your situation

7 Tips for Sticking to Your Holiday Budget

Source: RBC Royal Bank

The holidays can get pricey and you risk a debt hangover if you do not have a plan in place to guide your spending. There are plenty of ways to keep tabs on your spending leading up to the holidays and the right strategy can free up room in your budget for investing in your future.

1. Set spending limits for the holiday season

Before you start holiday shopping take a look at your finances and set limits on:

• how much you have available to spend overall
• who you are shopping for
• how much to spend per gift including shipping fees taxes duties and customs

Then make a plan to stay within those limits. Track your spending across multiple categories in real time to help you stick to your goals.

Be transparent with your loved ones if you plan to cut back on holiday spending. You are likely not the only one worried about your holiday budget and your friends and family may wish to join you in celebrating a lower-cost holiday.

2. Avoid impulse purchases

Small expenses like extra stocking stuffers can add up to a big dent in your holiday budget. Instead shop from a gift list that keeps you in control of your spending:

• shop online or use click-and-collect to avoid the temptation to pick up extras at checkout
• if you tend to overspend using credit make your holiday purchases using your debit card
• adopt shopping habits that allow you to shop mindfully and stick to your list

3. Start shopping early to find deals

Starting your gift search early gives you the best chance to find a great deal:

• Black Friday and Cyber Monday offer plenty of deals but smaller promotions in the weeks before can be just as good
• sign up for retailer email newsletters to learn about deals early then unsubscribe after your purchase
• consider installing an app or browser plugin that notifies you when gift items drop in price

Additional ways to save:

• handmade items add a personal touch while thrift store items offer something truly unique
• use reusable or recyclable materials like fabric, newspaper or brown paper instead of store-bought wrapping paper
• create digital or handmade holiday cards instead of buying expensive ones

4. Give the gift of experiences

Consider forgoing traditional gifts and focusing on spending time together:

• give an experience gift such as tickets to an event or show your loved ones are looking forward to
• spend a day together hiking or ice skating
• attend a free winter festival or event in your area

Experience gifts can be more meaningful than physical gifts and often cost less.

5. Give back with a charitable donation

Consider giving a donation to a charitable cause in a loved one's name:

• a donation helps make the world a better place and makes it easy to stick to your budget since you can donate a set amount
• keep receipts for tax season as registered charities will issue receipts by February 28 of the following year

Ways to give back without spending money:

• volunteer at a food bank or other charitable organization over the holiday
• perform random acts of kindness such as sending a thoughtful note to a loved one or shoveling a neighbour's driveway

6. Invest your holiday savings

Sticking to your holiday budget could leave you with extra funds. Make those dollars work for you by investing your savings:

• deposit funds into a Tax-Free Savings Account (TFSA) where they can grow tax-free
• contribute to a Registered Retirement Savings Account (RRSP) which allows you to deduct your contribution on your income tax
• consider a First Home Savings Account (FHSA) if you are saving for your first home which offers both tax-free growth and a tax deduction on contributions

7. Start planning for next year

Financial planning for the holidays lays the groundwork for financial success in the new year. The habits formed from savvy holiday gift giving such as sticking to a budget and spending mindfully can positively impact your overall financial planning:

• tracking your spending can help you identify opportunities to trim expenses and free up funds for investing
• set up automatic transfers into an investment account to build your wealth over time
• small savings goals add up to large savings over time — setting aside $20 per week into a high interest savings account accumulates over $1,000 in a year

Start your journey by talking to a financial advisor who can help you find an investment account that meets your needs and work with you to create a plan to build your wealth.

Key takeaways

• set a clear spending limit before the holidays and stick to it
• shop from a list and avoid impulse purchases
• start shopping early to take advantage of deals before peak season
• consider experience gifts or charitable donations as meaningful lower-cost alternatives
• invest any holiday savings into a TFSA, RRSP or FHSA to make your money grow
• use the habits developed during the holidays to build better financial practices year-round

Moving to the U.S. From Canada: Tips for a Smooth Move

Source: RBC Royal Bank

Moving day to the U.S. is bound to be hectic and exciting. Here are four steps to make your transition south of the border as smooth as possible.

1. Consider an international moving company

If you are going to be transporting a significant amount of personal belongings from Canada to the U.S. it is a good idea to hire an international moving company. International moving companies have the experience and expertise to:

• wrap and pack your valuables so they arrive safely at your destination
• manage the paperwork required to clear customs
• navigate border procedures on your behalf

2. Equip your mover with everything they need

Your mover will be your biggest ally as you navigate your journey to the U.S. Make sure they have all the information and documentation needed to transport your belongings without incident.

Documentation required at customs

• a completed 3299 customs form — the Declaration For Free Entry of Unaccompanied Articles — which provides a full inventory of what you are bringing into the U.S. and ensures your items comply with U.S. customs laws and regulations
• your work or study visa and letter of offer of employment if applicable
• your valid passport
• your I-94 document stamped when you cross the border

If you are driving yourself across the border

If you plan on moving without a mover and driving yourself and your belongings across the border keep in mind:

• there are rules that come with bringing your own car
• if you are renting a car or trailer make sure you are allowed to cross the border with the rental
• have all necessary paperwork ready to show the border agent

3. Enter the U.S. before your possessions do

You do not need to be physically present at the border with your belongings — you just need to get there first. Arriving in the U.S. before your possessions means:

• all completed paperwork and immigration information can be processed ahead of time
• a simple inspection will take place once the moving truck arrives

When you enter the U.S. customs officials will put an I-94 document in your passport provided your work visa is in order. You must provide your moving company with a copy of this document to prove you have been granted entry into the United States. U.S. Customs will then verify this information when your moving truck arrives at the border.

Keep in mind that your personal possessions can enter the U.S. duty-free as long as you have owned them for at least a year. If you are thinking of buying new things before moving it is best to compare the cost of purchasing them in the U.S. versus buying in Canada and then paying to move and import them.

4. Consider your auto needs

If you are planning on having a car after you move you have a few options:

• sell your car in Canada and buy a new one in the U.S.
• import your car to the United States by driving it across the border or shipping it

Things to consider about your vehicle

• cars can be less expensive to buy in the U.S. and you may pay less sales tax on the purchase
• if you import your car you may have to pay sales tax on it when you register it in some states — for example if you bought a car in Toronto you paid HST and when you bring it to the U.S. you may then have to pay additional state sales tax
• your existing vehicle must meet U.S. safety and environmental standards

Documentation required to import your vehicle

• a compliance letter from the manufacturer stating your vehicle meets U.S. safety standards
• a completed EPA (Environmental Protection Agency) form confirming your car conforms to U.S. emissions standards and requirements
• a completed HS7 form which is a declaration form for importing motor vehicles into the U.S.

The National Highway Traffic Safety Administration (NHTSA) website has all the information and forms needed to import your car.

Key takeaways

• hire an international moving company to handle logistics and customs paperwork
• have all required documents ready including the 3299 form, passport, visa and I-94
• arrive in the U.S. before your possessions do to streamline the border process
• personal possessions owned for at least a year can enter the U.S. duty-free
• research your vehicle options carefully as importing a car comes with additional tax and compliance requirements
• being as prepared as possible on moving day sets you up for a smooth transition to your new U.S. life

Sharing Expenses with Roommates: How To Set Your Home Up For Success

Source: RBC Royal Bank

If you are headed off to college or university chances are you will be living with roommates. Communication is key to keeping money from coming between you and your roommates. Here is how to get on the same page.

1. Have the money talk before you sign the lease

Find roommates who are mature enough to manage their money responsibly and will pay their fair share of the bills. If you do not know your roommate's spending and saving habits just ask:

• find out how they plan to cover living expenses so you can feel confident they will pitch in their share
• if your gut tells you potential roommates might not be a good financial fit listen to it
• having financially responsible roommates sets you up for success from the start

2. Determine which bills you are responsible for

Before you sign a lease find out what expenses you will be responsible for versus what is covered by the landlord. In addition to rent you may need to pay:

• rental deposit — a one-time payment to secure the rental typically equivalent to one month's rent
• tenant's insurance — required by some landlords and covers accidental damage to your unit or neighboring units as well as your personal belongings
• utilities including water, electricity or hydro and heat
• internet and streaming services
• furniture, window coverings, lighting and other miscellaneous setup costs

Once you have a place in mind make a sample budget together to ensure every roommate can afford to live there. An upfront agreement on paying for shared services like internet and streaming can help prevent conflict later.

Make sure your numbers include moving and setup costs such as internet installation fees and refundable deposits to the utility company.

3. Know what happens if your roommate drops the ball

Even with the best of intentions things can go wrong. It is important to understand how your roommates' financial actions can impact your life.

What if my roommate does not pay rent

It depends on your lease arrangement:

• if you have signed separate lease agreements with your landlord you may not be responsible for their share of the rent
• if you signed a joint lease you and any co-signers are on the hook for the total rent even if your roommate does not pay their fair share

What if my roommate does not pay a bill

• if your name is on the bill you are responsible for paying the whole amount even if you have an agreement to split the expense
• if your roommate's name is on the account and they are not paying it contact the service provider about your options

What if my roommate wants to move out

• if you signed separate agreements with the landlord and there is still time left on each lease it may be difficult for one roommate to move out without paying a penalty
• the best next step is to talk to your landlord to discuss available solutions

4. Have occasional money chats once you move in

Regular check-ins with each other can keep everyone on the same page with finances. Keep it simple:

• plan a regular money talk at a set time each month
• set up a shared document that everyone can update and access
• start a group chat that makes it easy to ask questions or remind each other about upcoming expenses

Being prepared and upfront with your financial responsibilities can keep you and your roommates on track all year. An open approach to money helps keep the peace and reduces misunderstandings and conflicts among the group.

Key takeaways

• choose roommates who are financially responsible before signing any lease
• create a shared budget together before moving in to make sure everyone can afford the space
• establish a clear agreement upfront on who pays which bills and when
• understand your legal responsibilities under your lease in case a roommate fails to pay
• keep communication open throughout the year with regular money check-ins

Is It Too Late to Save for Retirement? How to Invest in Your 40s, 50s and 60s

Source: RBC Royal Bank

Between the high cost of living and a challenging economy many Canadians feel like they are behind when it comes to saving for retirement. Half of Canadians say their most important investing goal is to retire comfortably yet three in four worry about how to balance saving for immediate priorities versus saving for retirement.

Even if you are starting late on saving for retirement at least you are starting now. Taking concrete steps in your 40s, 50s and 60s can help you regain a sense of control over this next phase of your life.

1. Imagine your wants and needs in retirement

Retirement plans look different for everyone. Spend some time assessing what you want from your retirement years:

• do you picture yourself at a quiet cabin or living a snowbird lifestyle?
• will you downsize your home or stay where you are?
• will you continue to work part-time or go all-in on travel and hobbies?
• will you need a car, housekeeping services or other support?
• consider what kind of help you might need if you face health challenges as you age

Once you understand what retirement looks like for you consider which savings vehicles make sense:

• if you have RRSP contribution room investing this way can lower your tax bracket
• if you are working part-time or have a lower income TFSA contributions might be a better fit

2. Take stock of where you are today

As a picture of your retirement forms start assessing your day-to-day spending:

• track your income and expenses over a month to see where your money is going
• identify whether you have room in your budget to start or increase retirement contributions
• check in with a financial advisor especially if you have other priorities like contributing to a child's RESP

Understand your full financial picture

Work with an advisor to understand your actual net worth which could include:

• a pension from a previous employer
• investments in Canada or abroad
• the equity in your home
• any government benefits you are entitled to from CPP and OAS

Address debt

If you are carrying debt take steps to reduce it to free up cash flow and increase your financial security:

• pay off high-interest debts like credit cards first
• consider consolidating high-interest debt into lower-interest debt to reduce your payments
• the closer you are to retirement the more important it is to reduce debt since payments can balloon and constrain your retirement finances

Canada Pension Plan and Old Age Security

It can be encouraging to see how much you are entitled to receive from the Canada Pension Plan (CPP) and Old Age Security (OAS) at retirement. The amount depends on:

• how long you have lived in Canada
• how long you have worked
• your average earnings over your career

3. Understand your attitude toward investing

Your timeline is an important factor when choosing investments.

If you have a longer time to invest (15 or more years to retirement)

• you might consider higher-risk investments since you have more time to make up for potential losses
• over time markets generally recover from losses which can offer peace of mind through market fluctuations

If you have a shorter time to invest (less than 15 years to retirement)

• you may decide to opt for stability with lower-risk investment options
• once you plan to start using your savings soon you may not be able to afford significant drops in your investments even if your style has been more high-risk until now

No matter which category you fall into speaking to an advisor can help determine the right investment mix for you and your goals. Even if you technically have a longer time horizon you may not be able to tolerate the ups and downs of higher-risk investments and a lower-risk option may be a better personal fit.

4. Be intentional

Once you have decided retirement is a priority investment there are ways to get on track.

Use pre-authorized contributions

• set a fixed monthly amount and automate the process to eliminate the chance of forgetting or spending the money elsewhere
• contributing a fixed amount means you purchase investments at different price points over time which averages out your cost rather than investing a large sum when prices happen to be high

Maximize your RRSP

• max out any RRSP contribution room you have to the best of your ability
• RRSP contributions may help lower your income tax bill
• if you are married you can make strategic decisions to invest in a Spousal RRSP and receive a tax deduction

Use your TFSA

• you can grow your money tax-free in a TFSA for any savings goal including retirement
• in 2024 the TFSA annual contribution limit is $7,000

Take advantage of employer matching

• if your employer offers a workplace retirement savings program use it
• employer sponsored savings plans are a tax-efficient way of maximizing your savings through payroll deductions
• aim to contribute at least enough to take full advantage of any employer matching contributions so you are not leaving free money on the table

Key takeaways

• it is never too late to start saving for retirement — starting now matters more than when you start
• visualize what you want your retirement to look like to stay motivated
• assess your current financial picture including debt, net worth and government benefits
• understand your risk tolerance and match your investment choices to your timeline
• automate contributions to stay consistent and disciplined
• maximize your RRSP, TFSA and any employer matching programs available to you
• work with a financial advisor to build a solid retirement plan tailored to your situation

Where Did My Money Go?: The Rising Cost of Groceries in Canada

Source: RBC Royal Bank

Over the last five years rising prices of staples like potatoes and ground beef have caused many Canadians to change their shopping habits. Despite those changes Canadians still face substantially higher food costs across the board.

How much more are Canadian families paying for groceries

For a family of four — a couple with a 5-year-old boy and a 10-year-old girl — food expenses jumped approximately 26% between 2019 and 2024 according to data from the Agri-Food Analytics Lab at Dalhousie University. In 2019 the average monthly spend was around $974. By 2024 that figure had risen to approximately $1,227 per month.

To capture the full impact including how shopping habits have shifted: a $1,000 grocery basket in 2019 increased to approximately $1,296 in 2024 — a nearly 30% increase.

Food inflation by category (2020 to 2024)

All major grocery categories saw significant price increases over this period with some of the steepest rises hitting everyday staples:

• bakery and cereal products increased by over 30% across the period with a peak of 14.8% in 2022
• meat increased by over 30% cumulatively with a 9.5% spike in 2021
• vegetables increased by over 20% cumulatively with a 12.7% spike in 2022
• dairy increased by over 20% cumulatively with a 9.7% spike in 2022
• non-alcoholic beverages and other food products increased by over 30% cumulatively with a 12.8% spike in 2022
• fruits increased by over 20% cumulatively
• seafood increased by over 20% cumulatively
• restaurants and takeout increased by over 20% cumulatively

All eight major food categories increased by at least 20% between 2019 and 2024.

Examples of specific price increases

Some individual products saw dramatic price jumps:

• ground beef went from $8.88 per kg to $11.16 per kg — a 27% increase
• potatoes increased approximately 36%
• canned tomatoes increased approximately 54%
• margarine increased approximately 71%
• tofu (350 g) increased approximately 16%
• restaurant meals increased from an average of $269 to $336 per month for a family of four

What is shrinkflation

Many companies responded to rising costs by reducing package sizes while keeping prices the same — a practice known as shrinkflation. This means consumers are paying the same or more for less product without always realizing it. Common examples include:

• Redpath sugar reduced from 2 kg to 1.5 kg — a 25% reduction in quantity
• Doritos bags reduced from 80 g to 72 g at the same price
• Dawn dish soap reduced from 479 ml to 431 ml at the same price

Pantry products like snacks and frozen foods are the most common shrinkflation offenders.

Monthly food costs by family member in 2024

The cost to feed each person varies based on age and nutritional needs:

• toddlers cost approximately $197 per month
• children and adults vary between these ranges
• teenagers aged 14 to 18 cost approximately $388 per month to feed
• pregnant and breastfeeding women cost approximately $363 per month to feed

Based on this research Canadians can expect their grocery bill to be 26% to 30% higher today than it was in 2019.

How Canadians are adapting

Faced with food inflation Canadians have made significant changes to their shopping habits:

• 86% of Canadians have changed their consumption habits with most purchasing fewer items than before
• the share of grocery sales at big box stores increased from 21.6% in early 2021 to 25.9% by end of 2022 as shoppers moved away from traditional grocery stores
• fresh produce is the most commonly purchased discounted item closely followed by meats
• approximately 30% of Canadians now choose which store to shop at based on available discounts and promotions
• couponing and discount hunting have become standard strategies to stretch the grocery budget

Key takeaways

• Canadian grocery costs have risen 26% to 30% since 2019 hitting all major food categories
• shrinkflation has made the true cost of inflation harder to spot as package sizes shrink while prices stay flat or rise
• families with teenagers and pregnant or breastfeeding members face the highest monthly food costs
• Canadians are responding by switching to big box stores, buying fewer items, and shopping sales and discounts more actively
• building grocery savings into your monthly budget is increasingly important as food costs continue to climb

How to Pay Off Debt Faster

Source: RBC Royal Bank

About one third of Canadians struggle with debt. According to Equifax Canada consumer debt in Canada hit $2.56 trillion at the end of 2024 — up 4.6% from the previous year — with the average non-mortgage debt per consumer reaching $21,931. Consumer credit card balances climbed 7.8% year-over-year through the fourth quarter of 2024.

Carrying debt does more than drain your finances. It can affect your mental health, relationships and daily life. About 60% of Canadians say they lose sleep over debt. But there is a way out.

Why a debt repayment plan matters

Creating a debt management plan that fits your financial situation is crucial for taking control of your finances. The benefits include:

• lower interest costs — reducing your balance means paying less interest over time
• better credit score — a healthy credit score opens doors to home ownership, better interest rates and more credit options
• peace of mind — facing your debt with a solid plan helps you feel more in control of your finances

Step 1: Assess your current debts

Before you can tackle your debt you need to know exactly what you owe.

List your debts

Create a list of all your bills, statements and balances owing. For each debt you need to know:

• the total amount you owe
• the interest rate (APR)
• the minimum monthly payment
• the due date

Prioritize your debt by interest rate

Arrange your list by interest rate putting the highest first. This makes it easier to see which debts are growing fastest. Credit card interest rates in Canada typically run from 19.99% to 25.99% which is why credit cards generally come first in repayment plans.

Consider transferring your credit card balance to a lower-interest card to save money on interest charges and help you pay down the principal faster.

Step 2: Build a budget to free up cash flow

Once you know what you owe create a budget to see where your money goes and find opportunities to redirect funds toward repayment.

Follow the 50/30/20 rule

Divide your monthly income into three categories:

• 50% for needs — housing, food, transportation, health care, child care and minimum required debt payments
• 30% for wants — non-essentials like vacations, dining out and treating yourself
• 20% for savings and debt repayment — direct this toward payments above the minimum required and toward savings goals like an emergency fund, a home down payment or retirement

Trim discretionary spending

To increase the amount going toward debt repayment:

• go through your non-essential spending line by line and ask if you could find a less-expensive alternative or cut it out entirely
• review your needs category and look for ways to reduce costs such as shopping at a cheaper grocery store or finding a less-expensive cell phone plan

Redirect savings to debt repayment

When debt and interest are piling up consider redirecting savings toward debt repayment. Set up automatic payments to higher-interest debts instead of your general savings account beyond your emergency cushion.

Step 3: Create a debt repayment plan that fits your goals

Debt avalanche method

• focus: highest interest rate first
• pay the maximum amount possible toward the debt with the highest interest rate while making minimum payments on the rest
• best for: reduces total interest paid and saves the most money over time
• ideal for: people who are patient and not easily discouraged by slower progress

Debt snowball method

• focus: smallest balance first
• pay the maximum amount possible toward your smallest debt while making minimum payments on the rest
• once the smallest debt is paid off apply the maximum to the next-smallest debt
• best for: provides quick wins and motivation to keep going
• ideal for: people who need to see immediate success to stick to a plan over the long term

Hybrid approach

Combine both methods — tackle a small balance first for a quick motivational win then switch to highest-interest-rate focus for the remaining debts.

Celebrate when you hit milestones. Recognizing your progress can help motivate you to continue making positive financial choices.

Step 4: Consider debt consolidation or refinancing

Tracking multiple debts with varying due dates and interest rates requires ongoing effort. Consolidation helps by rolling everything into one loan with a single monthly payment.

How does debt refinancing work

Refinancing is the process of exchanging existing debt for a new loan with better terms such as a lower interest rate, a fixed payment schedule or simplified single payments. If rates have fallen since you first borrowed refinancing could lower both your monthly payment and your overall interest costs.

What is debt consolidation

Consolidating your debts means combining balances on multiple credit cards or loans into a single line of credit or loan at a lower interest rate. The benefits include:

• frees up cash flow
• lowers your interest rate
• simplifies payments by creating one centralized debt at one financial institution

Canadian options for debt consolidation

• take out a personal loan or open a line of credit to pay off multiple balances at once
• homeowners can refinance their mortgage or set up a home equity line of credit (HELOC) to access lower rates than what credit cards charge
• in Canada home loan refinancing rules typically allow you to borrow up to 80% of your home's value minus what you owe on your mortgage

Risks of consolidating debt

• you might take on more than you can repay
• it can create a longer repayment horizon
• it may briefly affect your credit score when you apply for a new loan
• if you leverage home equity there is a risk of losing your home if you cannot make payments

How to reduce your debt through relief programs

Debt relief programs help decrease what you owe or make repayment easier. Unlike consolidation which involves repaying the full amount relief programs can reduce your actual debt.

Government-approved debt relief programs in Canada

• Canada Revenue Agency (CRA) — penalties and interest may be waived if special circumstances apply to your situation
• Canada Student Loan or Canada Apprentice Loan — the Repayment Assistance Plan (RAP) may reduce your payments based on your income
• borrowers with disabilities may be eligible for additional support through specialized programs

5-step debt repayment plan checklist

Step 1: Organize

Gather all your bills, statements and balances. Know the total amount owed, interest rates and minimum monthly payments for each debt.

Step 2: Set your budget

Review your monthly income and expenses to determine how much you can allocate toward debt repayment.

Step 3: Reduce expenses where possible

Consider ways to lower costs such as shopping at a different grocery store, choosing more affordable food brands, opting for public transit or carpooling, moving to a more affordable area or getting a roommate.

Step 4: Consider a debt consolidation loan

When you consolidate debts you make just one monthly payment which can simplify and even lower your total costs.

Step 5: Stick to the plan

Lifestyle changes and financial sacrifices may be necessary — stay committed to the plan.

Canadian resources for debt management

Credit counselling services

• Credit Counselling Canada — a non-profit service with objective accredited professionals who help with your best interests in mind
• Canadian Association for Financial Empowerment — a collective of not-for-profit accredited agencies that can assist you with financial literacy and help you get out of debt

Government financial literacy resources

• The Financial Consumer Agency of Canada (FCAC) offers tools, calculators, guides and tips for staying on top of your finances
• Canada.ca Managing Debt section covers the fundamentals of understanding your debt, preventing future debt and what to do when dealing with debt collectors

Frequently asked questions

What causes most debt in Canada

The most common sources are credit card spending, mortgages, student loans, car loans and unexpected expenses such as health-related costs.

What are the main types of debt

Debt typically falls into three categories: secured debt such as mortgages and car loans, unsecured debt including credit cards and personal loans, and government debt such as student loans or taxes owed.

Will debt consolidation hurt my credit score

It can affect your score briefly when you apply for a new loan but consolidation simplifies payments and may lower your interest rate. Making payments on time will help your score recover and improve over the long term.

Should I pay off high-interest debt or save first

Direct your attention to high-interest debt such as credit cards because interest accumulates faster than savings can grow. Try to put aside a small emergency fund first then focus on debt repayment.

What happens if I only make minimum payments

You keep accumulating interest and end up paying back much more than you originally borrowed.

Key takeaways

• list all your debts with balances, interest rates and minimum payments to get a clear picture of what you owe
• build a budget using the 50/30/20 rule and redirect any freed-up cash to debt repayment
• choose a repayment method — avalanche for maximum interest savings or snowball for motivational momentum
• consider debt consolidation to simplify payments and potentially lower your interest rate
• use Canadian government programs like the FCAC, CRA relief or the student loan Repayment Assistance Plan if you qualify
• seek help from credit counselling services if debt feels overwhelming — you do not have to do it alone

I Got Pre-Qualified For a Car Loan. What Should I Do Next?

Source: RBC Royal Bank

Pre-qualification is a great way to know how much of an auto loan you qualify for before visiting a dealership. It allows you to shop with confidence knowing that when you find the vehicle you want you already have a good idea of how your interest rate, down payment and financing term could affect your payments.

Step 1: Finalize your budget

Take a closer look at your pre-qualified loan amount and consider your down payment options:

• re-evaluate your budget to determine if you can comfortably afford the monthly payments associated with the loan amount
• adjust your budget as necessary to ensure you are prepared to handle the financial commitment
• factor in the full cost of ownership including insurance, fuel, maintenance and registration fees

Step 2: Shop with confidence

With your finalized budget in mind start looking for a vehicle within those bounds:

• research different car makes, models and features
• consider safety ratings, fuel efficiency, maintenance costs and potential resale value
• use this information to narrow down your options and find an affordable vehicle that aligns with your needs and preferences
• stay within your pre-qualified budget range to avoid being upsold at the dealership

Step 3: Negotiate the purchase

Pre-qualification does not guarantee approval once you formally apply for a loan but it is an excellent resource to use during negotiations:

• mention your pre-qualification status when discussing financing with the dealer
• stay firm on your budget during negotiations
• ask about manufacturer incentives and rebates available for your purchase — the dealer may call these consumer credit, bonus cash or a purchaser allowance and they can range up to thousands of dollars
• be confident and trust your research during negotiations
• do not be afraid to visit other dealerships if the first dealer will not budge on a price over market value

Step 4: Formalize the contract

After finalizing the purchase price and terms with the dealership you will need to complete the loan application process with your chosen lender:

• provide the necessary documentation such as proof of income, identification and vehicle information
• be responsive to any requests from the lender to ensure a smooth and timely loan approval
• once you sign the contract and finalize your auto financing you can drive off the lot with your new vehicle

Key takeaways

• pre-qualification lets you know your borrowing power before visiting a dealership — giving you confidence and leverage during negotiations
• always re-evaluate your budget after pre-qualification to make sure monthly payments are truly comfortable
• research vehicles thoroughly before visiting a dealership so you are not pressured into a decision on the spot
• always ask about manufacturer incentives and rebates which can save you thousands of dollars
• pre-qualification is not a guarantee of final loan approval so be prepared to provide documentation when you formally apply
• do not hesitate to walk away and visit another dealership if the deal does not meet your needs

Navigating Inflationary Times: 4 Strategies to Help Protect Your Finances

Source: RBC Royal Bank

Concerns about inflation are top of mind for many Canadians as the cost of gasoline, home prices, food and services continues to increase while purchasing power diminishes. Mitigating the impact of inflation on your finances is a matter of planning, budgeting and staying informed.

Strategy 1: Diversify your investments

Whether you are a seasoned investor or just starting to save for retirement or education it is important to be aware of inflation risk. Higher inflation is not always bad for your portfolio as long as you are well diversified.

Portfolio diversification means spreading your investments across different asset classes such as stocks, bonds, real estate and commodities. Instead of making one or two big investments having multiple smaller investments across your asset mix can help reduce risk. This is because inflation can affect some asset classes more than others.

Investing success is about preparing your portfolio for a wide range of outcomes both good and bad. Focusing on the long term and being well diversified is a great way to protect your portfolio from potential risks such as rising inflation.

Strategy 2: Focus on tangible assets

Tangible assets — also called hard assets — are those that have physical substance. Real estate and precious metals such as gold or silver are good examples. These assets have long been considered a haven for investors during inflation because they are existing physical objects and are less dependent on monetary value.

Common examples of tangible assets include:

• real estate (your home or investment property)
• precious metals such as gold and silver
• vehicles
• jewelry and antiques

The value of these commodities does not have much positive correlation with stock and bond markets since they will likely always carry intrinsic value and may even appreciate during times of inflation.

Strategy 3: Maintain a budget and monitor expenses

Rising prices can take a toll on your finances if you are not monitoring your expenses closely. To stay on top of your spending during inflationary times:

• account for inflation when building your budget
• keep your budget flexible to prevent any unwanted surprises at the end of the month
• regularly review your financial habits, strengths and weaknesses to create a personalized budget
• make sure your budget can handle the pinch of inflation by leaving room for price increases on essentials like groceries, fuel and utilities

Strategy 4: Stay informed

Keeping up with economic changes and trends allows you to better plan your financial future. Long-term investments will heavily depend on overall economic conditions and market trends influenced by inflation. A little knowledge can go a long way toward making investments that work with your risk tolerance.

Key economic indicators to monitor

• the Consumer Price Index (CPI) — measures the change in the price of a basket of consumer goods and services over time
• inflation rates — shows how quickly prices are rising across the economy
• interest rates — set by the Bank of Canada and directly affect borrowing costs, mortgage rates and savings returns

Regularly monitor financial news and publications to stay informed about significant developments or policy changes that may impact inflation. With this knowledge you can assess potential risks and opportunities associated with different investment options, allocate your resources strategically and take advantage of favourable economic conditions.

Key takeaways

• diversify your investments across multiple asset classes to reduce your exposure to inflation risk
• consider allocating some of your portfolio to tangible assets like real estate or precious metals which tend to hold value during inflationary periods
• keep your budget flexible and review it regularly to account for rising prices on everyday essentials
• stay informed about key economic indicators like the CPI, inflation rates and Bank of Canada interest rate decisions so you can make smarter financial decisions

4 Ways to Reduce Your Monthly Expenses

Source: RBC Royal Bank

Many Canadians are familiar with the end-of-the-month jitters. Managing personal finance can be stressful and impulse purchases or fun nights out can come back to bite you when the bills arrive. The good news is there are practical steps you can take to help reduce your expenses.

1. Set the right budget

Most of your financial strategy should involve sticking to a budget but finding the right number requires a good understanding of your current financial situation. Once you know what you are working with, organizing your expenses helps you get a clearer sense of where your money is going and where you can cut back.

2. Cut unnecessary subscriptions

Now that many services are subscription-based — meal boxes, online memberships, streaming services and more — your monthly subscriptions should be one of the first places to look when cutting expenses.

Why subscriptions add up faster than you think

• it is easy to forget to cancel a service after you stop using it and over time those fees become an unnecessary drain
• check to see if you are still actively using everything you are paying for
• small monthly payments can be deceptive — a $10 monthly fee adds up to $120 over the course of a year
• auto-renewals may cost more once an introductory discount runs out so set a reminder to cancel before the discount period ends

What to do

• audit all your subscriptions and cancel anything you are not actively using
• watch for price increases when introductory pricing expires
• consolidate where possible — for example choose one streaming service instead of three

3. Reduce utility costs

Utilities are a major monthly expense for most households. A little mindfulness can save you money over time without compromising on comfort or convenience.

Simple changes that cost nothing

• turn off lights when you leave a room
• use natural light when possible during the day
• make sure your faucets and shower heads are not dripping
• unplug unused electronics since many devices draw power even when not in use

Changes with a bit more effort

• switch to a low-flow showerhead
• limit your time in the shower
• find moderate thermostat settings in hot summers and cool winters rather than running the heat or AC at full blast
• wash larger full loads in your dishwasher or laundry rather than running multiple small loads

4. Be a savvy shopper

Saving money on purchases means optimizing the way you shop.

Know your budget

Working within your budget helps you reduce impulse purchases and avoid carrying more debt than you need to. While you cannot plan for every expense having a clear budget keeps you grounded when temptation strikes.

Comparison shop

The internet has made comparison shopping easier than ever:

• check stores in your area for deals and coupons before buying
• mobile apps can show you when stores have your favourite items on sale
• collecting loyalty rewards or coupons can save a meaningful amount at checkout

Consider your options before buying

Before making a purchase ask yourself:

• is this something you could borrow instead of buy?
• could you find it second-hand or refurbished?
• does it need to be a brand name or would a store brand work just as well?

Track prices on items you buy regularly

If there are items you know you want track their pricing over time so you are more likely to spot a genuine deal and less likely to pay full price unnecessarily.

Key takeaways

• start with a clear budget that reflects your actual income and fixed expenses
• audit your subscriptions regularly and cancel anything you are not actively using — small fees add up fast
• small habit changes around utilities like turning off lights and unplugging devices can meaningfully reduce your monthly bills
• be a strategic shopper by comparing prices, using coupons, considering second-hand options and tracking prices on items you buy regularly

Managing Money When You Lose Your Job

Source: RBC Royal Bank

A job loss can test your money management skills especially if it is unexpected. Bills still need to be paid and basic expenses need to be covered even when your income changes. Creating a plan for staying on top of your finances while you are in between jobs can make a stressful time easier to bear. Acting quickly can help minimize the financial fallout.

Step 1: Collect your last paycheques or severance pay

Once the shock of losing your job wears off confirm any final payments owed to you by your employer. These can include:

• your last paycheques
• any bonuses owed
• payout for unused sick leave or vacation time
• severance pay

Make sure you receive everything you are entitled to before moving on to other steps.

Step 2: Apply for EI benefits if you are eligible

Employment Insurance (EI) benefits provide money to people who have lost their job through no fault of their own. Key points about EI:

• apply immediately — delaying your application could cause you to lose benefits you are entitled to
• you may qualify if you were laid off or let go without cause
• the amount you receive is based on your insurable earnings and how long you worked
• EI is administered by Service Canada through the Government of Canada

Step 3: Assess your financial situation

Once you have received your final pay and applied for EI benefits take stock of where you stand financially:

• how much money do you have in savings
• what alternate sources of income might you have including government benefits, severance pay or a partner's income
• how long can your current savings and income sources cover your essential expenses
• knowing these numbers gives you a clearer picture of how much runway you have

Step 4: Revisit your budget

If a job loss drastically reduces your income you may need to reduce your spending by the same amount:

• separate your essential and nonessential expenses
• cut out anything you do not absolutely need to maintain a basic standard of living
• look for ways to trim down spending in other areas such as groceries, utilities and subscriptions
• focus on covering housing, food, transportation and minimum debt payments first

A budgeting tool can make this process easier by tracking your spending automatically and helping you identify where to cut back.

Step 5: Seek out alternative income sources

Searching for a new full-time position might be your top priority but exploring other ways to generate income in the meantime can ease the financial burden:

• offer services in your neighbourhood such as dog walking, lawn care or snow removal
• take on a part-time job at a local restaurant, grocery store or retail shop
• look for freelance or contract work in your field
• sell unused items around your home
• anything extra you can bring in helps stretch your savings until you are back in a full-time role

Key takeaways

• act quickly after a job loss — confirm final payments and apply for EI benefits without delay
• get a clear picture of your finances including savings, expected EI payments and any other income sources
• immediately revise your budget to match your reduced income by cutting non-essentials
• explore side income options to bridge the gap while you search for your next role
• stay calm and focus on what you can control — a plan makes a stressful situation much more manageable

Mastering Money: Tips for Creating a Budget That Works for You

Source: RBC Royal Bank

Managing personal money matters is a major source of stress for many Canadians. One of the quickest ways to alleviate some of the pressure is to get organized by creating a realistic budget that works for you. Gaining control of your finances can help reduce unwanted surprises and offer peace of mind each month.

Tip 1: Use the 50/30/20 rule as a starting point

Take a look at your paycheque each month and evaluate how much of your take-home pay — your income after taxes — is going towards your needs, wants and savings.

Needs (50% of take-home pay)

Your needs are the basic necessities of life. According to the 50/30/20 rule about half of your take-home pay should go here:

• housing (rent or mortgage)
• food and groceries
• transportation
• health care
• child care

Wants (30% of take-home pay)

Your wants are all the optional extras. A typical budget can afford to spend about 30% of income here but if you need to cut down on spending this is the first place to look:

• vacations and travel
• streaming services and entertainment
• dining out
• hobbies and personal spending

Savings and debt repayment (20% of take-home pay)

The remaining 20% typically goes towards savings and paying down debt:

• retirement savings (RRSP, TFSA)
• emergency fund
• personal goals like a home down payment or education
• debt repayment above the minimum — the less debt you carry the more of this 20% can go toward long-term savings

These percentages are suggestions not rules. Use the 50/30/20 framework as a baseline and adjust based on your personal circumstances.

Tip 2: Create SMART financial goals

SMART is a useful framework for setting achievable and realistic financial targets.

Specific

Have a clear focused goal to reach. Vague goals like "save more money" are harder to act on than specific ones like "save $5,000 for an emergency fund."

Measurable

Make sure you can track your progress objectively. This allows you to celebrate milestones along the way and get a clear sense of whether your budget plan is working.

Attainable

Your financial goals should be within reach. If you have something ambitious in mind set smaller more achievable goals first to build momentum toward the larger one.

Relevant

Your financial goals should accomplish something important to you or your family. Goals that feel meaningful are easier to stay committed to.

Time-bound

Set a specific timeframe to achieve your goals. Deadlines create a sense of urgency and give you a benchmark to measure your progress against as well as a clear finish line to work toward.

Tip 3: Review and adjust your budget regularly

Circumstances change and sometimes a budget plan stops working as well as it once did. Allowing flexibility in your budget will prevent you from abandoning the whole plan when you hit a rough patch.

Why regular reviews matter

• regular reviews help you catch unnecessary expenses earlier — for example unused subscription services can quietly drain your income for months if you are not checking
• analyzing your spending patterns makes long-term planning easier and more effective
• with a good sense of your financial habits strengths and weaknesses you can make a personalized budget that syncs with your actual life and goals

How often to review

• monthly reviews help you catch month-to-month changes in spending
• quarterly reviews help you assess bigger trends and whether you are on track for annual goals
• review immediately whenever your income or major expenses change significantly

Key takeaways

• use the 50/30/20 rule as a starting point — 50% on needs, 30% on wants and 20% on savings and debt repayment
• adjust the percentages to fit your personal circumstances — the rule is a guide not a rigid requirement
• set SMART financial goals that are specific, measurable, attainable, relevant and time-bound
• review and adjust your budget regularly to catch unnecessary spending and adapt to life changes
• building flexibility into your budget makes it more sustainable over the long term