My compliments, Canada, for mostly ignoring the buy now, pay later option when buying things like clothes, cosmetics, electronics and airline tickets.
BNPL has been around a couple of years and it hasn’t caught on so far despite some ideal economic conditions. We’ve seen a spending boom on goods and services since the worst of the pandemic, based in large part on what’s been described as revenge spending. Splurging, in other words.
In a recent IPSOS survey, just 15 per cent of those surveyed said they have used instalment payments on credit or debit card purchases, while another 10 per cent said they hadn’t tried BNPL, but were aware of it and would likely use it. Almost four in 10 had heard of BNPL, but hadn’t used it and were unlikely to do so. Everyone else was unaware of it.
If you select the BNPL option when buying something, you typically end up paying a small percentage upfront and the rest through a few biweekly or monthly payments. BNPL is better than carrying a debt on a credit card because no interest is generally charged on your unpaid balance. But let’s be clear about what BNPL is really about – getting people to spend more than they can afford at the moment. It’s a win for retailers and the companies offering BNPL services when this happens.
Used once or on rare occasions, BNPL is defensible. But serial usage means you’re overspending and at risk of getting overwhelmed by your instalment payments. Try the SNBL alternative – save now, buy later.
For more on BNPL, check out this episode of the Globe and Mail’s Stress Test personal finance podcast for Gen Z and millennials.
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Rob’s personal finance reading list
Big-time savings in the kitchen
Consumer Reports cooked up this list of ways to get more value from your grocery spending and get more efficiency from your fridge and stove. Lots of stuff to chew on here. Sorry.
If I had a million dollars
A financial coach on saving $1-million for retirement. It’s doable, she says.
Should he sell his investments to buy a house?
A Reddit discussion launched by a Vancouver renter with more than $500,000 in investments. He wonders if it makes sense to sell off his investments to buy a home. Now for a deep dive into the cost of living in another expensive city, Toronto. Breakdowns for both renters and owners.
A guru of frugality buys a Tesla
One of the most influential voices on achieving financial freedom is a guy who goes by the name Mr. Money Mustache. Here, he blogs about spending US$52,000 on a Tesla to replace his aged minivan. It’s all about balance.
Ask Rob
Q: What do you think about treasury bills and the new exchange-traded funds that hold them, UBIL and CBIL?
A: I wrote about them last month. Thumbs up.
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.
Today’s financial tool
The Bank of Canada offers a tool to calculate the effect of inflation on investments and savings.
The money-free zone
How to remember Gordon Lightfoot in a personal finance newsletter? I choose the song Rich Man’s Spiritual. More thoughts … Lightfoot biographer Nicholas Jennings calls this the coolest cover of a Lightfoot song – I’m Not Sayin’, by Nico, who later recorded with The Velvet Underground. I also like Harry Belafonte’s version of Oh Linda.
Watch this
A financial planner walks you through the new tax-free First Time Home Savings Account, the new best way to save a home down payment.
From the Twitterverse
The line one recent morning at a downtown Toronto food bank. Our two-tier economy – busy restaurants and airports, busy food banks.
In case you missed these Globe and Mail personal finance-related stories
- Why the FHSA could be called the ‘full-time renters’ program’
- Car dealer exposes loopholes in regulation and an ‘uptick in deceptive practices’
- Rollout of first home savings account remains inconsistent one month in
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be child-free or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You’re not bad at money – you’re suffering from money shame • Retirement might look different for Gen Z and millennials. Here’s how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ 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 down payment 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
