How to Buy an RRSP?

What Is An RRSP?

First Published Date: December 28, 2008

An RRSP (registered retirement savings plan) is not something you actually buy. You buy qualified investments to hold inside an RRSP. This is a type of account and you can hold a variety of products inside your RRSP.

What Products You Can Buy?

You can buy mutual funds, GICs, stocks, savings account and so on. These are just some basic products to mention. There are many other investment products you can buy and hold inside your RRSP account.

Is It Complicated?

Depending on what you are buying, it can be complicated to buy certain products such as stocks, bonds, etc. In my book Invest Now, I have described in detail how to buy these products. Today, in simple words, I will explain how you can open your first RRSP in a snap.

Two Easy Solutions for Novice Investors

Option One – Walk Into Your Local Bank

This is the easiest way to buy. Just walk into your local bank branch and your personal banker will be able to explain ins and outs of RRSP and what products you can buy based on your personal needs. Most of the banks have a variety of products to choose from, and you can pick the one that best suits your needs.

I like the idea of opening an RRSP in your local branch because it is very easy and simple. This option gives you the opportunity to talk to a live person, and you can hold your RRSP with the same institution you are already dealing with – that translates into less hassle and paperwork. Also, you have the option to transfer your money into your RRSP from your chequing or savings account.

Option Two – Do It Online

Financial institutions like ING Direct or President Choice Financial let you purchase RRSP online. This is good in one sense that you are doing everything from the comfort of your own home; however, there is no one sitting in front of you to answer your questions. Although they do have customer support to call, it’s not the same as talking to a person in front of you.

Final Word

One major advantage of going to a bank is that bankers are able to recommend and advise products based on your individual needs. However, this is not the case if you choose online option. Customer service reps will answer your questions and guide you through the procedures to choose a product, but they are not licensed to advise.

These are the basic and simple procedures to buy your RRSP. If you are looking to buy a wider variety of products, I would recommend award-winning book Invest Now – available at Chapters.Indigo bookstores and at all online retailers.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Dec 28, 2008.

How Credit Cards Work

Credit Cards

First Published Date: January 11, 2009

With the amount of talking that is done about credit cards, very little pertains to the actual details of how they work, how they should be used, and the different kinds of cards available. It is known more or less by everyone that when a person is in a lot of personal debt they tend to owe large amounts on credit cards – what are less widely known is how this situation comes about, how to avoid it and how a borrower can use a card to their advantage.

As short a description of how credit cards work as possible, first. A customer looking for greater spending power enters into an agreement with a bank, where the bank issues a card allowing a certain amount of spending (a credit limit). Any purchases made go on the balance of the card, against which a payment must be made every month. Should the balance reach or exceed the credit limit, no further spending will be possible until a payment is made to bring the customer in line with the agreement.

Debt problems with credit cards occur when a customer borrows beyond their means or their circumstances change. In theory, the bank will not lend an amount that the customer will not be able to pay back. However, the checks put in place to prevent this happening are not foolproof, and circumstances are always liable to change. A credit agreement is given based on a customer’s earnings, but should they suddenly lose their job they may find themselves unable to make full payments to their card. For this reason, it is wise to have some savings should you take out a credit card.

There are now more choices than ever for a customer looking to take out a credit card – these different options take into account the varying circumstances and needs of customers. A popular type of card is the low-interest/no interest credit card, which allows the customer to borrow money for a large purchase and then use a “zero interest” period to pay off the balance over the course of a number of months.

Interest-free periods when they were first introduced tended to last three months, but as banks compete for an increasingly crowded market it is becoming the norm for banks to offer as long as a year interest-free. When this period is ending, a customer will often transfer the balance to a new card. If done assiduously, this can see the customer avoiding having to make a payment for years at a time.

Other cards take account of the spending habits of the customer by offering cash back on purchases, Air Miles when the card is used in certain locations, and reward points for frequent use. A recent innovation making it possible for the customer to use plastic even when they find credit hard to come by, the Secured Credit Card allows the customer to “load” money on to their card and use it like a bank account – meaning they never spend money they do not have. These cards also enable the customer to build a good credit rating through regular loading.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Jan 11, 2009

Canadian Student Loans

Personal Finance For Students

Published Date : January 25, 2009

Third-level education is becoming more and more important in terms of getting a job in many sections of the economy. Some employers are unwilling to consider applications from candidates without a college diploma, and some of those employers will only to consider applicants with diplomas from certain schools. The problem for the prospective scholar is that college education doesn’t come cheap, with tuition, course materials, travel and accommodation costs often being prohibitive for the many students who cannot attend a college close to home.

Fortunately, for the needy prospective student, the Canadian government does have a program where they fund Student Loans for eligible scholars. Eligibility is decided on a number of factors including location (both of the pupil and the learning institution), current living costs, savings and parental income. For students who fall into the bracket of eligibility, a government-backed student loan is a godsend, allowing them to concentrate on their studies free of at least part of the worry of funding their education.

A student loan, as the name suggests, does have to be paid back when the student has graduated and is earning a salary, so it’s not free money and its use has to be priority-based. These priorities are in part, much the same as those that require the attention of a home owner – keeping a roof over one’s head, putting food on the table and paying bills. Even in subsidised student accommodation, these priorities are non-negotiable and in large this helps a student prepare for life after college.

Being responsible for your own budget teaches you to look after the pennies, which becomes all the more important when there is a mortgage to keep on top of and failure to pay that may result in your home being repossessed. Having to set aside cash for tuition fees keeps the importance of your studies at the forefront of your mind, reminding you why you’ve taken this step. When there are parties to attend most nights and a level of freedom beyond what you’ve known in the parental nest, it’s easy to feel that student life is all about the social side of things. But without responsible financial behaviour you could end up having to drop out and, without doubt, the restrictions of living back at home are felt all the more when you’ve lived without your parents for a spell.

If you don’t qualify for a government-backed student loan, there are still options available. Private student loans are one such option. Although they are not quite as secure an option as a government loan – being based on credit and therefore often necessitating that a parent acts as a co-signee- they are given by lenders at a low rate of interest and tend to be generous enough to cover the important costs of student life. Then, depending on the intensity of your course, it is possible to take on a part time job – which will often provide adequate money for as many toga parties as you want to attend.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Jan 25, 2009.

Mortgage Free by

Canadian Mortgages Stretching Further

First Published Date: August 28, 2014

A recent CIBC survey that was conducted by Angus Reid finds out that Canadians are stretching their mortgages one year further than previously thought a year ago. 58 is the new mortgage-free freedom age on an average. However, based on where you look at, the picture can be very different.

Here are some of the highlights from this survey:

– 55 percent of Canadians making extra efforts are paying their mortgage faster. It was 68 percent last year.

– Homeowners in British Columbia have the highest expected age to pay off mortgages at 66.

– In Alberta, Ontario, and Quebec the expected age to pay off mortgages is 55, 57, and 56.

– Alberta and Ontario have the highest percentage of homeowners taking extra steps to pay off their mortgages faster at 65 and 61 percent.

– British Columbia (47 percent), Quebec (48), and Atlantic Canada (48) have the lowest percentage of homeowners taking extra steps to pay off their mortgage faster.

– Small efforts can go a long way to save big time.

– For example, someone with a $250,000 mortgage (25 year at 4.99 percent interest) can save about $35,000 if they add $147 to their monthly payments.

– Nearly $30,000 on interest can be saved if the above owner makes $726 payments every two weeks, instead of one monthly payment.

– If the average Canadian tax refund ($1,600) is applied towards a mortgage every year, it would save 4 years amortization and save about $33,103 in interest.

Source: CIBC

Global Real Estate ETFs Take Off

Investors Chasing Global Real Estate ETFs

First Published Date: September 24, 2014

Who would not like the idea of buying global real estate without leaving home? No wonder global real estate ETF investments skyrocketed. As Bloomberg recently reports in an article, investors are gobbling up global real estate companies at a record pace.

According to the Bloomberg article, global real estate ETF the SPDR Dow Jones International Real Estate ETF (RWX) attracted 340 million in August, the most of any ETF that is comprised of property, mainly non-U.S. real estate.

Global real estate demand has dramatically exploded since the global financial crisis as investors started to look for a safe haven to park money and get higher returns.

As I mentioned in this article on A Dawn Journal in March, 2014, a PwC report mentioned that the global real market will grow substantially in the future due to rapid urbanization and demographic changes.

If you are looking for some global real estate ETFs, here are some places to start with your research. The iShares Global Real Estate (CGR) is a popular name trading on the Canadian exchange. On the U.S. exchanges there are SPDR DJ International Real Estate (RWX), SPDR DJ Global Real Estate (RWO), and Vanguard Global ex-U.S. Real Estate ETF (VNQI), among others.

Like any other investments, global real estate ETFs are subject to various risks such as market risk, currency risk, interest rate risk, credit risk, and so on. Also, do your homework before getting into any investments.