Moms and Money
Financial experts to make sense of raising a family in today’s economy

Raising a family requires financial know-how and commitment, and in the current economic environment, families are being faced with new challenges to balance their lives and cheque books. Three financial experts provided money tips and advice on how to survive a recession and manage the evolving financial needs of raising a family on Friday, March 27.

Vicki Chatterley – Coast Capital Savings

It is truly wonderful to talk to a group of women about such an important subject – money. I’ve now worked in the financial services industry for the past 29 years, the last 19 years as a working mother to 2 wonderful sons. I would not have done both if I wasn’t inspired and rewarded on a daily basis. My vocation is my vacation!

Although you may not be aware, what we are experiencing right now is not unprecedented. One example I can recall is the recession in the early ‘80s when interest rates went up to 21%! We thought that would never end and it actually only lasted six months before rates started to decline. It’s interesting how we react to changing interest rates, when they are going up we think they will keep going up, when they are going down we believe they will keep going down. This just proves that no one has a crystal ball! And more importantly why you need a financial plan to keep you on track.

One thing we all face is how to manage the evolving needs of the family. This period is really no different than any other period in our lives. It might just seem different or more challenging because demographically there are more people with a vested interest. 10 – 15 years ago they were still accumulating, now there is more at stake.

Review your personal goals and objectives. Instinctively we are smart and trying to do the right things, but have you sat down with your partner to discuss future goals and objectives in financial terms? Spend the time to get the plan done. What do you need to do to achieve success? Save more, spend less, or adjust a goal. Remember to prioritize goals and objectives. Don’t try to get everything done at once. Financial planning is a process. It is not a transaction. It needs to evolve and change. There really are unlimited places to spend the money, so be careful not to have tunnel vision. Take a holistic approach to how you spend money. Use your time wisely by saving early and often. I believe women by nature are visionaries which is a natural compliment to developing and implementing a financial plan. In a family, there are savers and spenders. The family needs to manage how this works.

Here are a few tips to help you with the process:

1) Establish a financial plan – determine your goals and objectives in all the areas you have deemed important and prioritize them.
For example:
a. Retirement – when do you want this to happen? How much income will you need or desire? Don’t forget about inflation!
b. Education – again how much and when?
c. Debt reduction – are we going forward or backwards in terms of cash management.
d. Risk Management – what if one or both income earners were gone?

Coast Capital Savings has produced “The Save Without Sacrifice” booklet that will help take you through the process of determining where you might need direction and information necessary to develop your own personal financial guide.

2) Make sure to take advantage of the Canadian Education Savings Grant (CESG) available only when a RESP is set up – regardless of how much you can afford to allocate something is better than nothing and the 20% grant is free money that you won’t get access to if you don’t.

3) Work out a strategy on how best to manage your debt, find a balance. For example don’t pay off the mortgage so fast that there is no money left to save for retirement or children’s education.

4) Manage the risk of premature death of one or both of you, or the event of a disability or critical illness that would affect household income and the plan that you have established through insurance products so you can sleep at night!

5) Estate planning – consider it a financial fire drill – you are gone, what kind of financial mess have you left behind and who is going to clean it up? And have you left the necessary resources to do it?

6) Tax minimization – depending on your marginal tax rate, you can pay as much as 25-30% extra if you aren’t managing this aspect of your finances. For example paying down the mortgage with after tax dollars when you could be buying rsp and using a tax refund to help pay it down, or putting it into RESP to gain another 20% in CESG.

7) Review your personal net worth annually – figure out your assets versus liabilities – is your net worth rising or falling? If it is fluctuating, why is this? Be aware, don’t hit the ignore button on your finances.

8) Establish and review the household budget. Get everyone involved, there might only be 2 income earners, but in a family there are many spenders.

9) Review investment portfolio asset allocation. Ensure that it is aligned with your goals and objectives for the funds. 93% of portfolio return and volatility is determined from asset allocation.

10) Get a second opinion. What is it costing you to have your money managed? Are your investments aligned with your goals for the funds?

As parents we are role models who need to demonstrate how to develop and work a sound financial plan for our families, regardless of the economy.
Take control of your situation!

Financial security will give you and your family peace of mind and the freedom to make choices in the course of life. Do this for yourself and your family.

Karli Anderson – Coast Capital Savings

I came out to Canada 13 years ago from Australia. When I arrived in Vancouver at 19, I fell in love with Kitsilano, a great guy and then consequently now have a baby. We now live in Coquitlam which has been a great community for us.

This morning I get to talk about the boring side of financial planning: protecting your family’s future regarding your finances. I wanted to ensure that if something happened to me, my family would be taken care of. So this includes things like investing in equity and securities, speculative investments, RRSP’s RESP’s and guaranteed investment products, critical illness, savings, wills etc.

If you don’t look at all of this when you’ve been working hard to build a financial future for your family, you could end up crumbling your whole financial foundation. With a plan in place you won’t have to liquidate your assets to survive. You need to ask yourself: what’s protecting your income?

Here are some stats to consider that put the value of insurance in perspective:
• 1 in 2067 homes will have a fire in it at sometime
• Car insurance is important…
• Disablility insurance is important…
• Critical illness insurance, 1/3 will have a heart attack or stroke before we’re 60 years old. Now this stat is closer to ½, so this is getting worse not better for our chances of avoiding these major health challenges. I really applaud those that are covered for this.

It is important to prioritize what is important to you. Are you willing to absorb your risk should something happen? It is important not to just take into consideration your debts. And as well, don’t just account for immediate debts, it’s also the upcoming ones that can create real challenges, ie: Taxes and Revenue Canada. Another topic to discuss is estate planning.

Today we’ll be talking about the protection side of your finances. Certain lifestyle changes may need to take place and you will want to review your protection. Do not just put your financial situation on autopilot. What if you were to lose a job or your marriage changed and you became separated? How would you support yourself? You will want to match your wishes and update this regularly to ensure that you are covered.

I had the unfortunate ‘pleasure’ of handing over a $100,000 disability insurance cheque, for a stay-at-home mom recently. Insurance was bought for protection of the whole family and the mom had to be in the hospital for an extended period of time and they needed to secure and pay someone to take care of the children.

Some financial tips are:

• To help with a stress-free lifestyle, have an emergency savings account.
• Save all of your dollars for the expenses in the year, ie property taxes.
• Review the lending rates you are borrowing at regularly because you could definitely end up with some savings.
• Are your payments set up for success? Don’t fall behind in other areas for your life: amortize over longer period to ensure you still have some cash flow.
• Credit card, payoff regularly and automatically
• Create a Will and get your estate in line incase of emergency
• Teenagers ages 16 and up, you can receive $500 per year from the government
• UCT benefit, under age six, $100 per child
• Group benefit plan, what is it, talk to a professional to see if it’s good for you.
• Exercise and enjoy moms groups because they keep you sane.

Shelia Walkington - Money Really Matters

Shelia is a money coach and co-founded the Women’s Financial Learning Centre. She worked as a traditional financial planner for Assante Financial Management for nine years before she recognized the need for a money coach to help people to take control of their finances. Helping people learn to manage their money on a day to day and month to month basis, to help people put together a plan to help guide their financial futures.

Important questions that people need to ask themselves, and often need guidance in, are:
• How can I manage my money better?
• How do I learn to manage my money on a daily & weekly basis?
• How can I maximize my income?

I came to recognize that there was a gap in the financial planning industry – no one was helping people with the day to day management of their money or how to get out of debt. I aim to teach and motivate women and couples to take control of their financial situation.

Most advisors are compensated by commissions, but Sheila is a fee-only coach. Not everyone needs to buy investment products, but they still need advice. Especially young couples with kids – they quite often want to know how to manage their money with one partner off work for 12 months on maternity leave or how to save toward a house. Many people want to know how best to get out of debt and ultimately reach their goals.

What we hear all the time at the Women’s Financial Learning Centre is that women think they are “not really that good with money” and or “not interested in it.” Secretly it seems that they want someone else to take care of the money stuff. But we all need to understand that it is OUR responsibility and we need to prioritize what’s best for us – no one else knows this but you. You tell us what you want and we’ll tell you what you need to do: we’ll help you put together a plan. Women are doers and researchers but the information out there in the world is confusing. We help explain the options to you so that you can manage your life and have the money to live it. Once people have a plan, they start to make financial decisions with ease and confidence. People then no longer just stick their heads in the sand and hope it goes away. We can all be good at procrastinating.

It’s funny, once women start talking about money they just want to keep talking about it. Find a trusted friend, a money buddy or a professional to start talking and learning about money. Find out who you can talk to and get the right advice about what your financial needs are. Women often start off by saying that they don’t even know enough to ask the right questions and let alone make the right decisions.

How does the current economic state affect you personally? On September 22, 2008 her husband quit his job, but then the economy took a dive. It created a lot of negative energy in their house so they called a family meeting. Once they reviewed their budgets, they knew what to cut and knew what new insurance they needed. Were their investments placed in the right areas? Through their discussion and review they confirmed that they were.

You can change your household environment by taking charge in a similar way. Spend less time worrying and more time planning. A clear plan will keep you focused on what really matters. Do you argue about money or do you avoid talking about it? She helps couples to be on same page to talk about money. Don’t react to your partners spending or saving habits. Revenge spending can be a reality: he buys a new TV so then she goes out and gets a new stove. Deal with your finances and spending habits together. The sooner you can get a grip on this the better so that you lower the stress in your life and lifestyle. Clear out the clutter of anxiety to deal with what really matters.

Do you have a budget? Note that it’s not just about knowing what you spend, it’s about changing your behaviour to save toward whatever your goal is. Look at the tips sheet and become content with spending less: trips with a thermos and banana bread like she and her husband do now, for example.

Question period:

What is the average amount one pays in banking fees for a business account?
Karli, $100 or it could be $40-60. Coast has a ‘Small Fee Account’ which slogan is “one small fee and the rest is free”. Or you can pay as you go if you are just starting off and have few transactions right now.

What would be my advantage if put money into a line of credit vs doing just another mortgage like everyone else to finance a new home?
Yes, mortgages are more traditional. It really depends on your personal situation, personalities and spending mentalities. Psychologically speaking it can be hard to see yourself $200k in debt on a daily basis. People do this but ensure that you’re moving to a better rate vs. prime rate achievement you already have. Banks are no longer giving prime rate mortgages….

Can you please tell me the benefits of disability vs critical illness insurance?
Critical illness insurance is good. Disability is good too to have because should your income disappear you’ll still be protected. If you’re diagnosed with a critical major health issues: cancer, heart attack, stroke – the cheque is in the mail as a lump sum regularly with critical illness insurance. Whatever the terms of your contract is. Five months can be the waiting period, but this can sink you. Critical illness is pricy but it can be worth it. Disability can hold you long term, critical illness is one time lump sum.

What if just you started your own business, how do you get insurance?
Non-cancelable is an option so that it doesn’t matter how your pay fluctuates. Keep your income up to date. Go get a minimum of $1,000 of insurance if you don’t have three years of financials showing an income pattern yet.