The Canada Revenue Agency reports that close to two of three people who filed their taxes already have received a refund, and the average amount is $2,113. That’s enough to do something for your personal finances with lasting benefit. Here are some ideas:
- Add the money to the down payment for your next vehicle purchase: Financing a new vehicle these days is alarmingly expensive as a result of high interest rates and prices. The more you put down, the less you need to borrow.
- Add it to a child or grandchild’s registered education savings plan: Contribute $2,113 to an RESP and you get $422.60 added to the plan via the Canada Education Savings Grant. A guaranteed 20 per cent return.
- Add it to a first home savings account: The contribution will generate a tax refund for the 2024 tax year, and you’ll benefit from tax-free compounding in the account. You can withdraw money from an FHSA tax-free as well.
- Add it to your registered retirement savings plan: Puts you on the path to another tax refund for the 2024 tax year, plus you benefit from tax-free compounding in your RRSP over the years.
- Buy a one-year guaranteed investment certificate: With a rate of 5 per cent, still widely available from alternative banks, you’re guaranteed to have $2,218.65 in 12 months. If you use a tax-free savings account, you can shelter your GIC interest from tax.
- Pay down debt: The interest rate on card debt is around 20 per cent and won’t budge when the Bank of Canada starts lowering rates later this year. A home equity line of credit typically has a rate around 7.7 per cent these days, which means expensive minimum monthly interest-only payments if you have a large balance.
- Start or build up an emergency fund: The latest numbers from the job market suggest some slippage, and that in turn raises the risk of layoffs and reduced hours of work.
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Rob’s personal finance reading list
High house prices? Yes, please
Here’s one of the best takes I’ve seen recently on the state of the housing market. Not the most encouraging read, but realistic in its assessment of where affordability is headed and how high house prices benefit a lot of people. Now, for a sign of the times in our dysfunctional housing market – a Reddit discussion on saving money on rent by living in a car.
The Guardian reports on young adults pulling back from the work force to live what’s called the soft life. “For millennials and the younger generation Z and Alphas, who may never be able to afford to buy a home or retire at a reasonable age, there is a growing feeling online that hard work is fortifying a system that, at best, is giving them nothing back …” Someone who has less than zero sympathy for what young adults are up against is U.S. personal finance guy Dave Ramsey.
The other insurance you might need
Life insurance is a no-brainer if you have dependants, specifically kids. But you’re more likely to become critically ill than die, which brings us to critical illness insurance. Here, a personal finance blogger works through her own thinking this type of insurance.
A roundup of streaming TV services, with a focus on freebies. I’d love to hear from people who have cancelled their cable TV service – what streaming services do you subscribe to, and how do you watch things like the NHL playoffs or election night coverage?
Reader comment: “I have been resisting the concept for years, but in March I finally broke down and went through the trouble of getting access to CRA My Account. I enjoyed having access to all this information electronically and was happy not to have to dig into my files of paper federal tax slips. But the CRA had another delightful surprise waiting for me. My account had a notification letting me know that I had an uncashed cheque from the CRA dating back to 2002! (I had moved provinces that year and I guess my tax refund did not get to my new address). It was easy to ask them to reissue the cheque. And so, this week I pocketed $200 that had been destined for me 22 years ago … and I owe that windfall to CRA My Account.”
Do you have a comment or question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Tools and guides
A list of best credit cards for newcomers to Canada.
In the social sphere
Social media: Financial advisers on group RESPs, which stands for registered education savings plans. Avoid.
Listen: I spoke to CBC Radio’s Robyn Bresnahan about renting and the cost of home ownership for an episode of her This is Ottawa podcast.
Money-Free Zone: I just bought tickets to see George Clinton and Parliament-Funkadelic at the Ottawa Jazz Festival in June. Here’s some classic Funkadelic – Good Thoughts, Bad Thoughts, from the 1974 album Standing on the Verge of Getting It On. Twelve minutes of psychedelic guitar amazingness.
More PF from The Globe
- Seven ways the 2024 federal budget affects your finances, from selling your cottage to RESPs
- Ottawa’s plan to count rent payments toward credit scores needs safeguards, tenant advocates say
- Divorced parents are supposed to share kid costs fairly. But that’s often not the case
- Why younger retirees who need to access their retirement savings should set up a RRIF
More Rob Carrick and money coverage
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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
