A lot of personal finance is about trying to exert some control over the uncertainties of life. But the uncertainty of death may be easier to address.
What would happen to your family if you died suddenly? If you have an up to date will and term life insurance, you can be confident you’ve done your best to provide an answer.
The Carrick on Money Back to Basics series has so far covered personal finance basics that are really about exerting control over your spending, saving and investing. This stuff is hard – it requires ongoing focus and sacrifice.
Looking after your family in case you die is a more manageable task because it has only two parts, term life insurance and a will.
Term life insurance is a way of putting a block of money into your family’s hands if you die. In deciding how much term life coverage to buy, consider how much it would take to pay off your debts, including mortgage, the costs of raising and educating your children, other family expenses and funeral costs. Pick an amount of coverage for your term policy, choose between term options like 10 years, 20 years or longer and then try some online quotes to compare the monthly premiums you’d pay. Just google “term life quotes Canada” and dig in.
Buying term is a pure insurance decision you make to protect your loved ones. When the policy expires, you can either renew it if required or let it lapse with no cash value. You may find you no longer need term coverage when your kids are grown and financially self-sufficient.
Like many people, my wife and I had a will drafted when our kids were babies. On my own personal finance to-do list is to get that will updated. Our twenty-something boys will not need to go live with this or that family member if we both died. We used a lawyer for our original will, and will consul one again for the update.
The cost could start at $500 to $700 or more, which I consider money well spent for the legal consultation that precedes drafting of the will. But there are a growing number of much cheaper, even free, will options available online. For simple situations and for those in a hurry, these kits are worth checking out. I did a quick google search for online wills and found:
One final thing you can do for your family in case you die suddenly: tell them – no, show them – where your will and insurance details are kept. Let everyone share the peace of mind of knowing these matters are looked after.
Back to Basics
Part One: Now’s the time to revisit the most basic rule of personal finance
Part Two: Would a 20 per cent interest rate get your attention?
Part Three: A month-by-month guide to excuses for not saving money
Part Four: How to ace your mortgage decisions
Part Five: A low-effort, low-risk way to profit from rising rates
Part Six: Budgeting for the never-ending cost of kids
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Rob’s personal finance reading list
How the big money is made in investing
The longer you stay invested, the better your chances of a good outcome. As they say in the financial advice biz, focus on time in the market and not timing the market. And now for a look at cryptocurrency and the HODL school of investing – hold on for dear life.
The real reason for high house prices
Why are house prices soaring? The primary driver is a speculative mindset that encompasses both individual and institutional investors. Here’s a recent column of mine advocating for more taxation of real estate investments.
Luxuries that are worth the money
A fun Reddit thread – people talk about what they splurge on, and the value they get.
Tax-filing for Americans living in Canada
An American personal finance blogger living in Canada finds a tax filing software solution to her problems reporting to the IRS.
Q&A
Q: A young person who is still a minor has inherited a significant amount of money. The inheritance has been invested by the executor in a guaranteed investment certificate which pays approximately $1,500 a year in interest. The young person is at least six years away from being an adult (21 years of age as outlined in the will). Upon turning 21, will this person have to pay any tax on the income generated by the GIC?
Answer from Jeffrey Zhang, tax expert at H&R Block: “While this sounds like a complex scenario, the answer is quite simple. For starters, most income is taxable, no matter how old you are. So let’s say the young person in this story is 16 years old. They are still responsible for taxes on income. However, if the GIC is this person’s only source of income, and the income is under the basic personal amount of $13,808 annually, they will not have to pay tax on it. As the individual gets older, if they do start to earn an income that puts them over the basic personal amount, the income generated by the GIC will be included in their income amount and they will owe taxes.”
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
A comparison of online will kits.
The Money-Free Zone
I read the news today, oh boy. And then I thought of this great song: Ball of Confusion, by the Temptations.
Who I’m following on Twitter
Scott Ingram, accountant, realtor and keen observer of what’s happening in the housing market.
ICYMI
What I’ve been writing about
- A global investing giant decides bitcoin belongs in balanced funds
- Why 2022 is a year to dig deep for contributions to RRSPs and TFSAs
- With group TFSAs, employers are finally starting to help employees save for more than retirement
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: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
