Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

What we’re seeing today in the economy is happening faster and hitting harder than anything most of us have experienced before.

That’s the main reason why almost everyone’s finances have been hurt in the pandemic through job losses or decimated investments. But we haven’t helped ourselves as much as we could have. After a decade of economic stability, we got a bit sloppy in some of our personal-finance habits. Here are some examples of ideas about money that no longer make sense.

Your line of credit is your emergency fund

One of the top prepandemic fallacies of personal finance is that interest is your reward for saving and, if interest rates are low, there’s little point in keeping money in a savings account. Instead, access money when you’re in need from your home equity line of credit, or HELOC.

Story continues below advertisement

HELOCs are a smart way to borrow for the short term because they carry very low interest rates – commonly about 2.95 per cent these days. But Canadian households are carrying a lot of debt these days. Piling on still more debt to weather a layoff is last resort, not a go-to strategy. It’s better to have savings, even if the interest rate is weak.

The prime focus of saving should be retirement

A U.K. government-run pension provider, the National Employment Savings Trust, has done something really smart in offering a “sidecar” savings option that allows people to put money into an emergency savings account while also saving for retirement.

When we talk about long-term saving in Canada, the context is mainly for retirement. The pandemic has reminded us of the importance of saving for emergencies as well. When things calm down, we should think about a savings recalibration. Instead of $100 into retirement plans, how about $75 to retirement and $25 for emergencies?

Personal finance columnist Rob Carrick offers some tips to help you maintain financial flexibility as markets drop and businesses shut down over COVID-19. The Globe and Mail

Savings-account TFSAs are for losers

People with tax-free savings accounts based on high-interest savings accounts have been mocked for their timidity and unworldliness. Why waste the tax-free aspect of TFSAs on interest of no more than 2 per cent or so when you could be using it on stock market returns quadruple that or more?

But the worst that can happen with a savings-account TFSA is that your interest rate declines. As long as you stay within deposit-insurance limits, your principal and interest earned are safe.

Crushing mortgage payments are a normal part of home ownership

Pushing your finances to the max to buy a house seemed to make sense when interest rates were low, the job market was strong and, most importantly, house prices were rising steadily. But taking as much money as the bank will let you have means you have almost no ability to cope with a loss of income, particularly if you have kids and car payments.

A better rule for the future: Buy as little house as you can get away with.

Story continues below advertisement

Using debt to finance consumption is normal

It’s pointless to rattle on about good debt (for investments that add to your wealth) and bad debt (for stuff you consume and that adds nothing to your net worth). Beyond the usual mortgage, paying for university or investing in a business or other assets, few of us can live a life of debt abstinence.

Where we’ve grown sloppy is in discerning the difference between the special, infrequent moments in life that warrant us going into debt and the use of debt as a supplement to regular lifestyle spending. A more discriminating approach to debt would make us more nimble in the next economic downturn.

Spending big on a vehicle is normal

The most egregious form of excessive debt is the car loan. The average monthly payment on a new vehicle loan was $696 in February, the data analysis firm J.D. Power has reported. Meanwhile, 56 per cent of new vehicle loans were spread over terms of 84 months and more.

These car loans might be the biggest dead weight in all of personal finance. Owning cars and trucks helps the Canadian economy and keeps your family on the move. But average car payments of nearly $700 are an extravagance you may want to put the brakes on.

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies