MONEY MATTERS
MONEY MATTERS
Readin ’, ‘ Ritin ’ and ‘ Rithmetic — were the key . I was quite good at the ‘ rithmetic , and I am sure most of you reading this are equally good at math . What makes me wonder is why most of us become intimidated when a dollar sign appears in front of numbers ?
The second basic fact in money management is that , after you have agonized and decided , you should invest some of your cash in a third-party investment — but you need to know there are still three additional decisions to make :
1 . Do you want to put your money into a licensed account ? A licensed account is a TFSA , an RRSP or an RESP . These accounts have been established as part of our Income Tax Act and must be administered by a licensed institution that will report your status to the Canada Revenue Agency .
You don ’ t have to do this ; but if you do , there could be income tax issues ( both good and bad ) now , and in the future .
2 . What specific investments do I want to place my money into ? There are a multitude of options available for you to choose from , and this is where the complexity starts . If you have not done some pre-meeting homework , you will soon be overwhelmed with the terms ‘ diversify ,’ ‘ risk ,’ ‘ yield ,’ ‘ r . o . i .,’ ‘ dividend ,’ ‘ share ,’ ‘ debenture ,’ ‘ bond ,’ ‘ emerging markets ,’ and so on . Do you need to know all of this ? No ! Most of these complex terms are only used by large , sophisticated investors like pension funds . Unless you are investing millions , you only need to know the basics .
3 . Should I designate my investment activities as ‘ self-administered ?’ ‘ Self-administered ’ means that you decide what kind of investments you want to make and the financial institution simply does the paperwork ( for which they charge a fee ).
Most firms , do not want you to designate your account as self-administered because the transactions you will probably choose will benefit you the most , but not them . A self-administered account usually means they will not earn as much in fees from the transactions as they would if you bought their pre-canned products . So , typically , they will not tell you about this option .
Designating your investment activities as self-administered is as easy as filling out one form .
So , folks , think like a teacher , and think about what we could do to help the myriad of people who find managing their money very confusing and difficult .
I think that the answer might be that we should put financial knowledge into the curriculum and make it a mandatory requirement for graduating . What do you think ?
In the meantime , for those masses of people who could not benefit from such an initiative because they are already out of school , perhaps someone should be developing a new app for smartphones , or a computer game specifically designed to train people about money .
The naysayers of course would say there is lots of information available right now , and that may be true ; however , most of that information has been prepared by financial institutions and is extremely biased , or , like the Canada Revenue Agency ’ s material , is in a form that adds to the confusion .
Just sayin ’.
Go to www . proventurespathway . com or email me at battyj @ telus . net if you would like to know more , or if you have questions . news & views SPRING 2015 | 19