What to focus on
Events and milestones always happen in life, and when they do, there are often financial consequences that come with them. Attending college, getting married, traveling, buying a home, having a baby – all cost money. In order to properly plan for such events, it is important to be mindful of what money you have. Part of this process involves understanding yourself: identifying your priorities, setting and tracking towards a budget and financial plan, and determining your financial knowledge and risk tolerance in order to make sensible investment decisions.
This section will help you determine what to focus on depending on where you are in your life stage. Just remember that your work doesn’t end here, and you should always continue learning.
Life events can change your financial plan and goals. That’s why it’s important to review your investments periodically to determine if they are still suitable given any changes in your financial plans or personal situation. For example, do you have a new marital or employment status? Are you closer to retirement? Have you introduced a new baby into your family? Look at how much you’ve invested, the growth you’ve achieved versus your plan and what your investment is worth today. This will give you an idea of whether you wish to make changes to your investments.
The best time is now
Are you new to investing? Are you in post-secondary training, going to college or university or considering starting to think about your financial future. In these years, spending is often greater than income but you should still focus on your financial future – it’s never too early or too late to start.
Even if you don’t have a lot of money to invest, it’s a good time to make sure you understand financial terms, how to invest, how to budget and make a financial plan, and most importantly, your investment goals and investor profile. This will help you be ready to invest and ensure you are making wise investment decisions that are right for you. Here are some areas you may wish to review:
Building your life
Starting a career. Finding a life partner. First job. First house. Starting a family. Paying off student loans. Buying a car. Your employment may include pension or savings plans. All of these have financial implications to whether you should be focused on debt reduction, saving or investing….or all three. How do they factor into your financial plans?
It’s hard to get somewhere if you don’t know where you are going. Make sure you know your (and your partner’s) investing personality and goals, create a budget, make a financial plan, research and choose investments that meet your goals, and make sure you review progress against your goals as life changes.
For example, your finances can change significantly when you have a child, with the added responsibility of having to manage your own expenses as well as the child’s. There are also a number of things you’ll have to think about down the road, including savings for future education (RESPs) and additional health care and insurance, should anything happen to you.
Here are a few helpful resources for you in this life stage:
Sandwiched in the middle
Building your career. Changing jobs. Growing your family. Paying off a mortgage and other debt. Sending your kids to college or university. Changing marital status. Starting to think about retirement (if you haven’t already). Caring for aging parents.
You may find yourself part of the sandwich generation, the term used to describe people who provide some level of care to both their children and their parents or in-laws. Being the centre of the sandwich isn’t just an emotional and physical stress, but also a financial one.
There are many life events that can significantly change your finances, but here are a few key stages to consider:
- Raising kids: Setting your kids on the right financial path should start early and continue throughout their childhood and teen years. Consider setting up a Registered Education Savings Plan (RESP) to help save for their education after high school. At the same time, talking to your children about the value of money and basic budgeting, savings and financial skills are essential. By helping them build good money habits, they will be equipped with the tools for financial independence as they grow older.
- Marital changes: Adding a new partner to your life can be a wonderful event, but getting divorced or separating from a partner can add additional stress to your life and significantly impact your financial situation. Either situation may require updating your overall financial plan, investment strategy, plans for children and retirement, among other things.
- Aging parents: As your parents grow older, you may be called upon to help in their retirement and elder years. Taking care of a loved one can be challenging emotionally and financially, and can include helping make tough financial decisions, covering expenses or physically taking care of their needs. Things like taking unpaid time off work to look after them can impact your own financial goals greatly. It is also important to play an active role in your parents financial protection, making sure they know and can recognize the red flags of investment scams and fraud.
And don’t forget yourself and your own needs – financial and otherwise – as you are busy helping others. Your income usually rises during these years and you may have more money to invest. Depending on your situation, your financial goals and risk tolerance may be very different, and they may change. While before you may have been willing to take higher risk investments that may give higher returns, you may now be looking for more stable options that provide growth or income. This is also a good time to start thinking about what you want life to look like when you get older. Periodically review your investments to determine if they are still suitable given any changes in your personal situation and make sure you know how to protect yourself from investment risks.
Here are a few helpful resources for you in this life stage:
Alberta’s population is aging. By 2031, when the last of the baby boomers reach 65 years of age, it’s projected that there will be almost one million seniors in the province – which means about one in five Albertans.
Older Canadians have a variety of financial needs, such as planning for retirement, paying off debt, helping out family members, living in retirement and estate planning. Canadians are living longer and leading more active lives than ever as seniors. You may be asking: when can I retire? When should I start planning my retirement? How do I plan for retirement? Will I have enough money?
In order to answer this, it is key that you start thinking about retirement early and lay out a pre-retirement/retirement plan. A retirement plan helps you decide what type of lifestyle you’d like to have, how much you need to save, how you’ll grow your retirement savings and how to manage your money after you stop working. In building your retirement plan, consider the following:
- Identify main sources of income available to you (RRIFs, annuities, pension, savings plans and other income)
- Set retirement goals
- Calculate how much you’ll need to save each year
- Take action. Set money aside, manage your investment portfolio, and get help from advisers. Determine how and when to turn your retirement savings and pension into income.
In your planning, also plan for unforeseen events that could affect your finances and your habits. Would you be able to cope with a loss in cognitive abilities? Have you prepared a protection mandate? A power of attorney? Have you laid out your wishes for your estate? Having an up-to-date will is essential to ensuring your estate is distributed as you intend it, otherwise your estate will be distributed according to provincial laws. Seeking legal advice can assist you in making these decisions.
Protecting yourself from investment fraud
Financial abuse is one of the most frequently reported forms of elder abuse in Alberta.
We are all, without exception, potential targets for fraudsters. However, due to the wealth they may have accumulated and, in some cases, their level of vulnerability, older people can be a favourite target of fraudsters. Unfortunately, the natural aging process can leave you vulnerable to fraudulent or unsuitable investments.
This happens far too often. Despite being cautious and experienced, Mabel was pressured into making an investment she never had a good feeling about. Watch Mabel describe her experience of losing her investment to a con artist.
Fraudsters also target older adults because they often have built a nest egg for retirement, or have acquired assets such as property or a pension. They may be looking to maximize their investments to help them through retirement and leave a legacy for their families. While anyone can be a victim of investment fraud, seniors have less time to recover from a financial loss. Taking the “How safe is your nest egg?” quiz can help you determine if you are on the right track to protecting your financial future.
When it comes to investing, you can never have too much information. Explore investment risks to learn more about the most common types of fraud and how to avoid them. After, learn more in our resources section to help you increase your financial knowledge and view senior-focused fact sheets and tools to help older Albertans, and the people close to them learn ways to spot and stop financial abuse, including:
- Spot and stop senior investment fraud
- Protecting seniors from financial abuse and investment fraud
- Financial concerns checklist
- 10 tips to protect your nest egg
- Recognizing investment fraud
- Investment fraud factsheet
Note that June is an important month for older Canadians as it hosts Senior Week and World Elder Abuse Awareness Day. During this time and throughout the year, the ASC reaches out to Alberta seniors and their families to help them improve their financial knowledge, empower them to make wise investment decisions and be aware of the signs and symptoms of financial fraud. Check the event section to see when we’re out visiting your community.