You asked, Rob answered
I’m Rob Carrick, personal finance columnist at The Globe and Mail and co-host of the new Stress Test podcast for young adults.
You asked about money – financial mistakes and regrets, lower-risk investing, the benefits of living at home, and the financial pressure of living in a city. We compiled five of your best questions
What’s your biggest financial mistake?
You asked: Looking back, what’s the biggest financial mistake you made?
Rob: Two financial mistakes: One was not starting earlier to save for retirement. I wasted some years with only minimal engagement on this, years I could have benefited from long-term compounding in the stock market. Another was not keeping our Toronto house when my family moved to Ottawa in 1994. I should have rented it out and then sold it for four-to-five times what we paid.
Living at home
You asked: Is the stigma or cultural attitude around living at home screwing over young Canadians?
Rob: The cultural stigma about moving back home with your parents has really faded as compared with 10 years ago. You never hear the phrase “boomerang generation” any more. The boomers who used to judge millennials for moving back home now see this happening in their own families.
In the COVID-19 era, I think more young adults should look at moving back home, where possible/practical, to see if they can get ahead financially or least tread water and avoid debt.
Invest in lower-risk products
You asked: Would you recommend investing money in lower-risk products if that money was saved for purchasing a home two-to-three years from now? If yes, which options should I consider?
Rob: I would so, so, so recommend using a zero-risk savings account if you’re buying a home two to three years from now. Use the website High Interest Savings to find the highest rates. Two per cent is still available, which isn’t bad at a time when the inflation rate is near zero. We cover lot of this ground, and more, on home buying, investing and crisis-proofing your finances on Stress Test.
I should add that I’m a bit surprised at how many people have told me they had housing savings in the stock market this year. Avoid having your hard-earned savings melted in a stock market crash.
1984 vs. 2012 vs. 2020
You asked: I wanted to follow up on your column about the financial challenges that students faced in 2012 to compared with 1984. Does grocery shopping cost more now when adjusted for inflation? And: how can I save more?
Rob: Here’s the column comparing the economic situation of millennials in 2012 to what I experienced as a university grad back in 1984. Grocery inflation commonly comes in ahead of the broader inflation rate – no question, it’s costing more and more to buy food.
As for saving more: Arrange for a preset amount to be automatically transferred electronically from your chequing account every payday into a high-rate savings account at an online bank paying 2 per cent or so. Saving is guaranteed this way. Start with an amount you can handle and then increase even a bit if things go well. All good online banks can help you set up these recurring transfers.
Getting your finances ready for baby
You asked: I’m wondering about your thoughts on the financial aspect of planning for a baby. In an ideal scenario, how much do you think is a good amount to save up, and do you think some of that money should be invested? Background context: We’re early 30s, have a house, and a four-month [emergency fund] set aside as well as some index fund investments in our TFSAs/RRSPs.
Rob: I suggest budgeting out your anticipated income during parental leave and your expected costs. Top up your emergency fund as required to cover your needs, and leave the money in savings to keep it safe during what could be a volatile time for the economy and financial markets.
I should also mention that an upcoming episode of our podcast for young adults, Stress Test, will cover the costs of having kids.
S1 EPISODE 4
Stress Test looks at how the pandemic has tested the basic rules of personal finance for young adults trying to pay off student debt, build careers, buy homes, raise kids and plan for the future.
How to crisis-proof your finances
This week on Stress Test: Were your finances ready for a major disruption like COVID-19? In this episode, Rob and Roma discuss how to avoid common money mistakes.
- We hear from a 36-year-old whose service industry job in Whistler, B.C., was wiped out by the pandemic.
- Plus, Roma talks to Vancouver–based financial advisor Julia Chung about everything from TFSAs and RRSPs to credit scores and the worst kinds of debt.
If you’re looking for solid financial-planning strategies and information about the savings tools available, this episode is for you.