Personal finance is big on acronyms, and that’s a problem.
In a recent survey of 1,502 adults, more than half could not say what RSPs, ETFs and GICs were. The one outlier was TFSAs – three-quarters of participants knew this is the acronym for tax-free savings accounts.
The survey, commissioned by the online bank Tangerine, documents how jargon gets in the way of helping people manage their money. But it also shows that TFSAs have overcome this problem. In Canadian personal finance, TFSAs are the No. 1 brand.
Use our TFSA Limit calculator to determine your annual contribution room limit
A big surprise in the survey is that only 39 per cent of participants could identify RSP, which is a shortened version of the more familiar registered retirement savings plan, or RRSP. Just 34 per cent knew that GIC means guaranteed investment certificate, but that’s no biggie because GICs are a niche product for conservative investors.
A mere 17 per cent knew that ETF stands for exchange-traded fund. ETFs have become hugely popular in recent years, but it’s obvious that there is much work left to do in teaching mainstream investors about them.
An acronym with just a 10 per cent recognition rate was ESG, a socially responsible investing term that stands for environmental, social and governance. Socially responsible investing is continually evolving and it’s unlikely that ESG will remain a go-to acronym in the field for long.
The big takeaway from the survey is that TFSAs are outshining RRSPs to an extent that is probably unhelpful. As I noted in a recent column, there’s some nuance in the analysis of which is more suitable in your situation.
It’s not that TFSAs are a bad choice – they’re great overall. Being able to save or invest money and then withdraw it tax-free clearly has broad appeal. But RRSPs deserve some consideration as well because they remain an important cog in our retirement savings system. More than 39 per cent of people should know what they stand for.
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Rob’s personal finance reading list
Pulled in two directions
A social worker writes about the emotional strain of caring for your children plus elderly parents, including feelings of guilt about not doing enough. People in this position are considered to be part of what’s called the sandwich generation.
Massive markups
A look at how the thrift store chain Value Village has been aggressively pricing the goods it offers for sale. In one case, it marked up the original price of a vase by three times.
Free places to find moving boxes
You can buy cardboard boxes for moving at Canadian Tire and home improvement stores for $2 to $5 or so each, and they’re both clean and durable. But free boxes are widely available – here’s a list of 19 places to find them.
How grocery stores get inside your head
A tutorial on how loss leaders – discounts on staples like milk or toilet paper – are used by grocery stores to get you to spend more than you intended. Your challenge: Go into the store, buy the deals and nothing else.
Did you renovate your home for a senior family member?
Are you taking advantage of the new multi-generational home renovation tax credit for expenses related to building a secondary suite for a family member who is a senior or an adult with a disability? The credit will provide a 15 per cent tax refund on expenses of up to $50,000 to a maximum of $7,500. If you’ve undertaken renos to create a secondary unit like this and are planning to include this on your 2023 taxes, the Globe and Mail would like to speak with you for an upcoming story. Please contact editor Roma Luciw at rluciw@globeandmail.com
Ask Rob
Q: My wife and I have both been let go. Between our savings and severance, we can manage our living expenses for six months. Do we tell our mortgage lender about our situation at all? We hope to find a job in the next few months, so is there a benefit in even letting our bank know?
A: I consulted mortgage broker Victor Tran of True North Mortgages for an answer to this question. Here’s his response: “There’s no obligation to notify lenders of a job loss (if the mortgage is already active). There are no ongoing audits of mortgage files unless there was suspicion of fraud during the application/underwriting process before a mortgage is funded/closed.” If this couple needs payment deferral options as a result of job loss, Mr. Tran recommended contacting the lender promptly to avoid missed payments. “Procrastinating increases the risk of missing a mortgage payment, which will ultimately affect the credit rating and repayment history with the lender. This will make matters worse, and a mortgage renewal may not be offered, leaving the homeowner with very limited options of securing financing elsewhere.”
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Tools, explainers, guides and charts
A summary of changes to the Quebec Pension Plan for 2024, including one that offers a financial incentive to delay benefits as late as age 72. Previously, incentives for delaying applied until age 70. That’s still the case with the Canada Pension Plan.
The Money-Free Zone
The new Sleater-Kinney album Little Rope deals with heavy duty themes like grief, but it also shows this hard-edged duo’s accessible side in Say It Like You Mean It. My favourite SK song is the more raucous Jumpers, from 2005.
Listen to this
In an episode of the Globe podcast The Decibel, personal finance reporter Erica Alini and independent business reporter Chris Hannay discuss their story on the rising cost of pet ownership.
On social media
A real estate broker on young couples downsizing to more affordable homes.
In case you missed these Globe and Mail personal finance-related stories
- Need an accountant? It may be hard to find one this tax season
- In the wake of Buy Now, Pay Later, we could be getting Dine Now, Pay Later
- Seven reasons to reconsider contributing to your RRSP this tax season
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
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- ✔️ The housing file: A house isn't special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada's big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here's how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
