5 Strategies to Boost Financial Literacy in Honour of Financial Literacy Month
Financial literacy is a valuable skill that benefits everyone. Whether it’s budgeting, tax preparation, or understanding mortgages, building your financial knowledge helps you to make informed decision to get the most of your finances. This November, in celebration of Financial Literacy Month, we are sharing five practical strategies to help you gain control over finances.
1. Build a Budget and Stick to It
Budgeting is an important first step in managing your money effectively. Start by creating a monthly budget that tracks all sources of income and accounts for expenses, savings, and investments. Here’s how to take it further:
Use Budgeting Apps: Apps like YNAB and Mint to make tracking spending easier by categorizing expenses and providing insights for adjustments.
Pay Yourself First: Best practice is to save at least 20% of your income by setting it aside before you pay other expenses where possible. Automating this payment can help make saving a consistent habit which allow your savings to grow with minimal effort. If 20% is too much, start smaller. What is most important is to build the habit early and save more when you can.
Budgeting is also a great way to involve teens and young adults by teaching them to manage their allowance or job earnings. It’s a skill that will help them build the confidence for future financial decisions.
2. Understand the Basics of Tax Preparation
A little tax knowledge goes a long way in helping you manage your wealth. Knowing the basics can help you save through deductions and credits.
Here are a few steps to start:
Explore available Tax Deductions and Credits: Canada offers various tax credits that can make a difference. For example:
• Charitable Donations: For federal tax purposes, you can claim a 15% credit on the first $200 of charitable donations and 29% on amounts above $200. High-income earners can qualify for a 33% rate on donations over $200.
– In Ontario you receive a 5.05% credit on the first $200 of donations and 11.16% on amounts over $200. With a combined maximum amount of 44.16% which when taking in the Ontario Surtax structure can be as much as 50.41% for high income earners.
– In Quebec, the provincial credit is 24% for donations above $200 and for high income earners 25.75% for a combined maximum credit after taking into account the Quebec Abatement of approximately 53.31% for high income earners in Quebec.
• Home Office Expenses: If you work from home, you may qualify for a deduction to cover part of your utilities, rent, and other expenses.
• Medical Expenses: This credit allows you to claim a variety of healthcare costs not covered by insurance.
It’s also important to stay up to date on CRA Requirements: Meeting CRA deadlines and filing requirements keeps you onside and avoids costly penalties.
Discussing taxes with your financial advisor and checking the CRA’s website for updates is also helpful. Don’t forget to get younger adults involved in tax preparation, to help give them a clearer view of these responsibilities.
3. Gain Insight into Credit Scores and Credit Cards
You credit score plays a significant role in financial opportunities, from loans to mortgages. Here are a few tips to maintain a good score:
Monitor Your Credit Score: Use free services like Credit Karma to check your score for accuracy and also to spot potential fraud.
Understand Interest and Fees: Learning about credit card fees, interest rates, and repayment terms is important to avoid costly errors. Paying off your credit card balances in full each month can boost your score and will help you save on interest.
Explaining credit to younger adults, including helping them understand payment history and credit utilization, can help them learn responsible credit use.
4. Learn About Mortgages and Real Estate Basics
If you own a home or have plans to purchase in the future, understanding mortgage basics is essential. Here’s where you can start:
Understand the different Mortgage Types: Fixed and variable-rate mortgages each have their pros and cons. Knowing the difference can help you choose the best option for your financial goals.
To help your family learn, let teens explore mortgage calculators or discuss property ownership, which can help them understand larger financial commitments.
5. Invest Time in Financial Education Programs or Workshops
Educational resources are a great tool, and worth exploring.
Free Online Courses through platforms like Coursera and edX offer courses on everything from basic budgeting to advanced investment strategies.
Your financial advisor is a great resource for personalized education on topics like estate planning, tax or portfolio management.
Finally, consider attending a financial workshop together with friends or family. This can open discussions and deepen shared financial knowledge.
It’s never too late to start. Exploring these tips will help you to improve your own knowledge while setting a positive example for your family.
