Financial Awareness Week
This week has been labelled Financial Awareness Week. Okay, not really. It has been labelled as something else, but the premise is the same. The name is derived from a financial magazine in Canada that I didn't want to repeat here. Just in case. Anyway, the point is, this week, there is going to be a lot of stories of everyone's financial health.
Yesterday, I saw an interview on a breakfast segment. The interviewee was discussing the fact that 60% of Canadians managed to save some money. The problem was that 40% of Canadians didn't know what to do with the money saved.
The most common way people saved their money was by leaving it in their bank accounts. Yikes! The interviewee mentioned that money saved now wouldn't have the same buying power later when the saver retires. Also known as inflation.
There was some back and forth banter between the interviewer and interviewee. Eventually, the topic of where to put your money was discussed and the stock market came up.
As an investor myself, this part was right on the money. The interviewee said that there was a lot of fear when investing in the stock market. Frankly, before I became somewhat financially literate, I too feared the stock market. The interviewer mentioned that a lot of people lost money in 2008.
This is where the interviewee got really interesting.
He flat out said "No!". That it was a major misconception.
People didn't lose money in 2008 unless they sold their stocks.
If people held onto their stocks, they'd actually be ahead and that people who invest in the stock market need to look into it from a long term perspective.
He didn't say what to invest or how. I suspect that will be brought up in over the week.
On the CBC, they did a segment where they reported that in the 1980s, the average savings rate for a Canadian was 20% of their income. Currently, in 2015, the average savings rate is a paltry 4%. Ouch.
In contrast, our (wifey and I) savings rate currently stands at 40%. It would be a lot higher, but we've had some surprise expenses the past couple of months (two weddings and a funeral).
Of course, we're fortunate we have a cushion available for unexpected expenses. The CBC interviewed a one income family with 3 children. They were essentially living paycheque to paycheque with zero margin for the unexpected. An unexpected lay off or car accident could be devastating for that family. The mother mentioned that 6 months of living expenses is just not possible in their situation.
If wifey and I both lost our jobs tomorrow and if the stock market crashed 40% overnight, we'd have enough cash and investments to survive 2 years without finding new employment.
Finally, the CBC also reported that the average consumer debt load in Canada is $21,000. This doesn't include mortgages or car payments.
Wifey and I don't have consumer debt. At least none that carries over month to month. Each month we pay our credit cards in full. It's important for us to do that so we don't need to pay the ridiculous 20% interest charges but at the same time take advantage of 1-3% cashback rewards on our credit cards.
Now putting these statistics together, that means 60% of Canadians are saving 4% of their income and that 24% of Canadians are keeping their money in cash. Despite saving 4% of their income, these people also have $21,000 in consumer debt.
Okay, maybe that's not 100% accurate. Doesn't matter though. It's all about awareness this week.
Yesterday, I saw an interview on a breakfast segment. The interviewee was discussing the fact that 60% of Canadians managed to save some money. The problem was that 40% of Canadians didn't know what to do with the money saved.
The most common way people saved their money was by leaving it in their bank accounts. Yikes! The interviewee mentioned that money saved now wouldn't have the same buying power later when the saver retires. Also known as inflation.
There was some back and forth banter between the interviewer and interviewee. Eventually, the topic of where to put your money was discussed and the stock market came up.
As an investor myself, this part was right on the money. The interviewee said that there was a lot of fear when investing in the stock market. Frankly, before I became somewhat financially literate, I too feared the stock market. The interviewer mentioned that a lot of people lost money in 2008.
This is where the interviewee got really interesting.
He flat out said "No!". That it was a major misconception.
People didn't lose money in 2008 unless they sold their stocks.
If people held onto their stocks, they'd actually be ahead and that people who invest in the stock market need to look into it from a long term perspective.
He didn't say what to invest or how. I suspect that will be brought up in over the week.
On the CBC, they did a segment where they reported that in the 1980s, the average savings rate for a Canadian was 20% of their income. Currently, in 2015, the average savings rate is a paltry 4%. Ouch.
In contrast, our (wifey and I) savings rate currently stands at 40%. It would be a lot higher, but we've had some surprise expenses the past couple of months (two weddings and a funeral).
Of course, we're fortunate we have a cushion available for unexpected expenses. The CBC interviewed a one income family with 3 children. They were essentially living paycheque to paycheque with zero margin for the unexpected. An unexpected lay off or car accident could be devastating for that family. The mother mentioned that 6 months of living expenses is just not possible in their situation.
If wifey and I both lost our jobs tomorrow and if the stock market crashed 40% overnight, we'd have enough cash and investments to survive 2 years without finding new employment.
Finally, the CBC also reported that the average consumer debt load in Canada is $21,000. This doesn't include mortgages or car payments.
Wifey and I don't have consumer debt. At least none that carries over month to month. Each month we pay our credit cards in full. It's important for us to do that so we don't need to pay the ridiculous 20% interest charges but at the same time take advantage of 1-3% cashback rewards on our credit cards.
Now putting these statistics together, that means 60% of Canadians are saving 4% of their income and that 24% of Canadians are keeping their money in cash. Despite saving 4% of their income, these people also have $21,000 in consumer debt.
Okay, maybe that's not 100% accurate. Doesn't matter though. It's all about awareness this week.
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