SEVEN MONEY MYTHS THAT KEEP CANADIANS FROM REALIZING THEIR FINANCIAL GOALS
Nov 15, 2022
Co-operators is educating Canadians during Financial Literacy Month by identifying common gaps in financial preparedness
Toronto, ON, November 15, 2022 — As Canadians face year-end decisions on investments, taxes, insurance, and retirement planning, Co-operators has identified common gaps in financial preparedness, stemming from the spread of money myths. During Financial Literacy Month this November, the company and its advisors are aiming to educate Canadians by highlighting these common blind spots.
“One of the best things Canadians can do to prepare for the future is to start now,” said Jessica Baker, vice president at Co-operators. “The first and most important step is acknowledging that we all have different levels of understanding about financial planning. And that’s okay.”
When it comes to money, Baker says that every Canadian has one thing in common: “Regardless of your current situation, there are resources out there that can help you reach your goals, whether you consider yourself to be a pro or a novice, and it all starts with building a financial plan that is unique to you.”
To spread the word, Co-operators, and its advisors, have compiled a list of the top money myths that Canadians are confronting today. Their goal is to help people separate myths from realities, so they can start financial plans that fit their individual needs.
Here are Co-operators top financial Myths versus Realities:
Myth 1: Saving is safe. Investing is risky.
Reality: As Canadians feel the impact of raising interest rates and inflation, it’s tempting to embrace the idea of “safe” or “lower-risk” investment options. But this strategy comes with a risk of considerable lost earning power. Investing in a diversified portfolio that matches individual needs with the help of a Financial Advisor can build long-term returns, while managing risk.
Myth 2: Single, young people don’t need insurance.
Reality: No one is free from the risk of loss or liability. When budgets are tight, tenant or renters’ insurance can provide critical coverage for unforeseen events like theft, fire, or water damage. Young people can also take advantage of lower insurance rates that provide continuing benefits as their lives develop and their needs grow.
Myth 3: RRSP season starts in mid-February.
Reality: Though the typical RRSP frenzy may suggest otherwise, there is no rule that says lump sum payments must be made to RRSPs before the annual March 1 deadline. Canadians can contribute to their RRSPs (up to individual contribution maximums) at any time of the year. The March 1 date is used to determine how tax benefits will apply to the previous year’s income. Depending on a person’s situation, a Financial Advisor may recommend contributing smaller amounts to an RRSP on a weekly, bi-weekly, or monthly basis.
Myth 4: Those who invest in mutual funds have sufficiently diversified portfolios.
Reality: Today’s spectrum of mutual funds is widespread. It’s not easy to gauge whether an individual investor is appropriately diversified. And that can leave some people vulnerable to losses from sectors. Leveraging the expertise of a Financial Advisor can help investors make nuanced adjustments to ensure their portfolio has the right balance of diversification aligned with their risk tolerance.
Myth 5: Fearful commentary online suggests that the Canada Pension Plan (CPP) is nearing bankruptcy and will not exist for future generations.
Reality: This sentiment is unfounded. CPP remains a cornerstone Canadian institution, managed at arm’s length from government operations by CPP Investments. Moreover, the CPP is projected to be sustainable through the next 75 years and beyond, according to the Office of the Chief Actuary of Canada.[i]
Myth 6: Guaranteed Investment Certificates (GICs), which have begun to raise interest rates on their fixed returns, are making a comeback as an attractive investment option.
Reality: Rising guaranteed interest rates may stir investor excitement, but this fact alone doesn’t mean GICs are the right option for everyone. For example, GICs may work well for those who have a shorter time horizon (for example if they need to access the funds for a house down payment in the next five years.) However, from an investment standpoint, many experts note that GICs historically lag in their yields compared to other options like Mutual Funds and ETFs.
Myth 7: Not everyone can afford a Financial Advisor.
Reality: Financial advice and holistic planning isn’t just meant for people with a lot of money. Everyone can benefit from working with a Financial Advisor whether you’re saving $50 a week or $50 a month. Financial Advisors partner with Canadians of all backgrounds, life stages and generations. They serve as trusted partners, guiding clients and working with them to identify and break-down obstacles, and create clear, personalized financial plans.
“Let Financial Literacy Month serve as a catalyst for you to take action on your finances,” says Baker. “It’s a perfect opportunity to learn the basics or brush up on your knowledge of money management, savings, and investing. That way you can build the financial plan that you deserve, one that you can be confident is right for your lifestyle, and one that brings your financial goals closer to reality.”
Co-operators is a leading Canadian financial services co-operative, offering multi-line insurance and investment products, services, and personalized advice to help Canadians build their financial strength and security. The company has more than $61.5 billion in assets under administration. Co-operators has been providing trusted guidance to Canadians for the past 76 years. The organization is well known for its community involvement and its commitment to sustainability. Achieving carbon neutral equivalency in 2020, the organization is committed to net-zero emissions in its operations and investments by 2040, and 2050, respectively. Co-operators is also ranked as a Corporate Knights’ Best 50 Corporate Citizen in Canada. For more information, please visit: www.cooperators.ca.
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