Banks Should Do a Better Job Teaching Canadians About Money: Survey + MORE May 5th

Photograph by Tony Lanz
Q: When two people buy a house, is it normal for them to make the same mortgage payment monthly, even if one person makes more money?—M.S., Toronto
A: Relationships are funny. What’s considered “normal” behaviour for one couple may be considered completely absurd by another couple living right next door. In my opinion, “normal” doesn’t matter. What matters is what works for the two of you, based on what you want. Take a big step back and talk about what you want for the future—both as individuals and as a couple. Then figure out how you’re going to pay for it. Not just the mortgage—all of it: house maintenance, groceries, vacations, cars, kids, retirement savings and your respective vices. Sure, when there is a disparity in income it can be a challenge to decide on priorities. When thinking long term, it is best if your retirement incomes are as close as possible, in order to minimize the tax you pay. This means the higher-income earner should pay more of the expenses pre-retirement…

Canadians can expect rates to stay ultra-low until 2016, according to Bank of Canada Governor Stephen Poloz. The top banker made this revealing statement at a Saskatchewan luncheon this week, adding that even if Canada’s economy returns to full capacity, rates will be slow to follow. While improvements in the U.S. have sparked speculation Canadian rates will rise in the shorter term, Poloz maintained that inflation must reach 2 per cent before any change occurs.
A Return to Normalcy
The overnight lending rate, which determines floating or variable rate loans, has been at 1 per cent since September 2010. But rates had been ultra low as early as 2008, even dipping as low as 0.25 per cent in 2009.
This was all in name of protecting the Canadian economy during the financial crisis. However, the issue now is consumers’ reliance on super low rates – the Bank of Canada must help Canadians readjust to normal borrowing conditions.
Record low rates stoked Canada’s debt loads, and contributed to an overheating housing market – though Poloz remarked that the risk posed by the housing bubble is “subsiding”…

Canadians are finding it harder than ever to save money, and they believe banks should do a better job of teaching them how, according to a recent poll from a group of credit unions.
The study found six in 10 Canadians said their current level of debt does not allow them to save as much as they would like, with three in 10 (31 per cent) unable to save any money at all.
Household Debt Rises, Personal Saving Plummet
Schools educate youth about geography, history and mathematics, but when it comes to financial literacy we’re on our own. While household debt continues to climb, the personal savings rate is shrinking. The average Canadian household owes $1.63 for every dollar in disposable income earned, according to Statistics Canada.
“In the last 20 years, the personal savings rate in Canada has plummeted while household debt has grown dramatically,” explains Marie Mullally, president and chief executive officer of Credit Union Atlantic. “More needs to be done to develop innovative options to help Canadians and their families develop healthy financial habits that will allow them and our economy to thrive…