November is financial literacy month across Canada – a time for people to learn and feel empowered to manage their finances. Did you know that credit unions provide financial literacy workshops to their communities through the Each One Teach One program? Last year credit unions delivered 17 financial literacy sessions to 319 Albertans.
We spoke to Dan Burger, Lending Services Manager at Rocky Credit Union, to find out more about financial literacy and what Albertans really need to know about their finances. Dan has been teaching Each One Teach One workshops for years, and as part of the team at Rocky Credit Union for the past 13 years he knows a few things about finance!
Tip 1: Learn to budget
Budgeting is the number one thing that people should learn, says Dan. A lot of us get our paycheque and then spend until it runs out. And then get another paycheque and repeat. But where is the money actually going? It can be very eye opening to look at your last three to six months of bank statements.
This includes tracking cash purchases. If you took $100 out of your account, where did you spend it? Lunches and daily coffees can add up, so don’t forget to note even small purchases.
Once you know where your spending is at, you can think about what your plan is going forward, says Dan. Do you want to save for a vehicle? A down payment? Maybe even retirement? Figure out how much you want to save and put 50 or 100 dollars from each paycheque into a savings or investment account.
Bonus tip – set up automatic transfers so you won’t be tempted to spend instead of save!
Tip 2: Use credit cards thoughtfully
Rocky Credit Union works with HeLa Ventures to teach high school students financial literacy at HeLa’s Mountain Adventure School. Dan says that when it comes to youth, another essential thing to understand is credit cards. They serve a purpose, but you can get trapped in credit card debt.
Say you see a good sale on a stereo system, so you buy it using your credit card. If you don’t pay your credit card balance right away, you’ll end up paying interest on it. Depending on how long it takes you to pay back, you could pay more in interest than you saved on the stereo!
The solution? Use credit cards for short-term debt only, and don’t overspend says Dan. Go back to your budget and if you’ve accumulated credit card debt you might have to readjust to pay that debt off. Maybe instead of going out to dinner four times a month, you only go out two or three times, he says.
Tip 3: Really get to know your mortgage
Committing to a mortgage is a big deal – it’s probably the biggest purchase of your life and you should have a good relationship with your lender. Believe it or not, some people don’t know which institution their mortgage is from says Dan. Besides knowing where your mortgage is, knowing the difference between a conventional and uninsured mortgage is very important he says.
In a conventional mortgage, home buyers must have a down payment of at least 20% of the purchase price of their new home. For example, someone buying a home for $400,000 would have a down payment of $80,000 or more (making the mortgage amount $320,000).
In an uninsured mortgage, home buyers have a down payment of less than 20% of the purchase price. The minimum down payment amount is 5%, so someone buying a home for $400,000 would need to have at least a $20,000 down payment (which would make a $380,000 mortgage). However, in that scenario, you’d need to pay a 4% government-mandated insurance premium, which would be $15,200 (bringing the total mortgage up to $395,200). And since that premium is added to your mortgage you are actually paying interest on it over the lifetime of that mortgage, says Dan.
Bonus tip – Start saving early for your down payment!
Tip 4: Watch out for fraud
People need to be aware of how much fraud is out there right now, Dan says. Everyone is getting emails, phone calls and texts from scammers and many people fall for it. Common scams will tell you your bank card has been compromised or your Amazon account has been hacked and you must take some sort of immediate action. Also, Revenue Canada would not ask you to pay your taxes in Apple gift cards, says Dan. If you have any questions or doubts, look up the institution in question and phone them (don’t call the number provided in the email or text message).
While these four tips are a great place to start, you can reach out to your local credit union anytime for more information or advice whether you are a member or not. And if you live near Rocky Mountain House, you are welcome to join Rocky Credit Union’s free monthly Each One Teach One workshops held at the Rocky Learning Centre. Follow them on social media or visit rockycreditunion.com for information on upcoming sessions.
About Rocky Credit Union
Rocky Credit Union helps people make the best financial decisions, servicing the town of Rocky Mountain House and surrounding area. Our members are our owners making Rocky Credit Union the largest single branch Credit Union in Canada. We support local businesses; we build our communities and help our members succeed. Our aim is to be the financial institution of choice in our market. We feel our PEOPLE and our SERVICE is what distinguishes us!! Come and see if you agree.