Money Matters with Doug Jones - Rogers TV Channel 10, Barrie (April 2022)
Money Matters with Mike Braga - Rogers TV Channel 20, Kitchener (April 2022)
Guest - YOUR MONEY The Financial Show with Nancy Snedden, VOCM, St. John's, Newfoundland and Labrador
March 19, 2022- Part I 'The Personal Finance Guide for Canadians in their 20s and 30s'
April 9, 2022 - Part II - follow-up segment
Guest - The Mike Farwell Show, CityNews570, Kitchener
Beginning June 2022 - every other Monday at noon on The Mike Farwell Show for 'Mastering Your Money with City News'
January 10, 2022 - commenting on the launch of 'Lessons on Mastering Money'
June 17, 2021 - commenting on the new Ontario Grade 9 Math curriculum which contains new financial literacy content
Guest - The Morning Edition KW with Craig Norris, CBC Radio One KW 89.1 FM, Kitchener-Waterloo
August 10 , 2020 - commenting on students in KW to learn financial literacy this fall
GLOBE & MAIL:
"The non-negotiable financial priority for renters"
Rob Carrick, March 3, 2022, 'Carrick on Money' Q&A interview on personal finance for young adults with Fred Masters as posted at www.theglobeandmail.com
Fred Masters has one of the more unique resumes in the field of personal finance education. He spent decades teaching high school accounting, then retired early and launched a business giving personal finance presentations for schools, universities and non-profits. He’s also a licensed mortgage agent and author of a book, Lessons on Mastering Money: The Personal Finance Guide for Canadians in their 20s & 30s. I invited Mr. Masters to do a Q&A on personal finance for young adults and we touched on housing, renting, investing and more. Here’s an edited transcript of our exchange by e-mail:
Q: Can you tell us one good financial habit that you commonly see among young adults these days, and one habit that needs work? A: Canadians in their twenties and thirties have an insatiable appetite to learn more about personal finance. I see this during each of my presentations when organizers share that registration numbers have exceeded expectations. This isn’t a surprise to me anymore. Our young adults have been taught virtually no mandatory personal finance throughout their days in school, and money worries are the number one source of stress for the group. They want to learn about money from trusted sources right now. For example, research has shown that 75 per cent of Canadians feel that employer-sponsored financial wellness training would help reduce their financial stress.
Q: Today’s young adults are as motivated to get into the housing market as any previous generation, even as prices soar way above the growth rate of incomes. What’s your advice to the frustrated young person who wonders if they will ever be able to afford a house? A: Managing expectations is a key element of success in many areas of life, and definitely applies when it comes to getting into the housing market now. Young adults might want to: View home ownership as a journey; it’s just fine to rent, then buy a condo, then upgrade to a semi-detached or detached home; Be open to coming ‘down market;’ if buying a condo or townhouse is all that you can afford right now, so be it; Consider markets that are outside of large urban centres – they may offer value, relatively speaking; Be aware of how your credit score is calculated and aggressively take steps such as paying down debt to boost your score and improve your ability to carry mortgage payments; Consider opportunities to maximize earnings (including upgrading qualifications); Use a mortgage broker before you begin house shopping so that you have a handle on issues such as your budget, choosing fixed vs. variable products, the stress test rules and fees for breaking the mortgage contract; Recognize that very few buyers qualify for mortgages alone, so a mortgage application likely needs to be made by couples, siblings, friends or with co-signors.
Q: How concerned are you about whether young adults will be able to afford to own a home, raise families and save sufficiently for retirement? A: There’s only one way forward here – save, save, save. Save until it hurts. Autosave by moving money automatically from your chequing account into your registered retirement savings plan or tax-free savings account the day after each payday. This year’s TFSA limit is $6,000. You would likely struggle to come up that much all at once, but autosaving $230 every other week does the trick.
Q: What’s your view on long-term renting, instead of home ownership? A: As a licensed mortgage agent, I’ve seen the pressure that some feel to break into the housing market. When buyers financially stretch themselves to their breaking point to get into the housing market (which is unfortunately a reality with skyrocketing prices), they sacrifice peace of mind. Worries abound when it comes to making those sizable mortgage payments. What if my hours get cut at work? What if both my expected promotion and accompanying pay raise never materialize? What if interest rates are much higher when it comes time to renew the mortgage? For those who do decide to undertake long-term renting, there are no ‘what if’ worries around mortgage payments. Granted, the rental market is tight and stories about dramatic rent increases for those in newer units are now in the news. However, renting eliminates home ownership stresses. For those who do choose to rent long term, they absolutely must commit to saving and investing on a continual basis to fund retirement, especially when there’s no workplace pension plan in the mix. This is absolutely non-negotiable.
Q: The pandemic has democratized investing in a way we’ve never seen before by allowing young adults to trade stocks at no cost via mobile apps. What’s your take on this phenomenon – is it a big win for young investors, or are they learning habits that many not serve them well in the long term? A: The ease with which any investor can now trade doesn’t mean that better decisions are being made. Our society is designed with speed in mind; everything needs to be fast. We just can’t expect, however, to get rich quickly. The easiest way for most people to tackle long-term wealth accumulation is to start as early as possible, save regularly and invest using index products. There’s nothing quick about that.
KIRA VERMOND, SPECIAL TO THE GLOBE AND MAIL, PUBLISHED AUGUST 31, 2021 Updated September 1, 2021
Three years ago, William Brown of Fort St. John, B.C., then age 12, started asking his aunt and mom about stocks, bonds, mutual funds and compounding interest. He liked the idea of investing and he wanted in. But because he hadn’t reached the age of majority, opening an investment account in his own name was out of the question.
So his mom, Teresa Brown, came up with a solution: If he could prove himself with fictional trades on an online phantom account for a year, she would open a Wealthsimple account and he could use it. He’d just have to run the trades by her first.
He tripled their first $200 investment right out of the gate. Now 15 and in high school, William is allowed to make any trade he wants from his phone using his mom’s account. Notifications on her own phone keep Ms. Brown in the loop.
Fred Masters, a financial literacy expert in Kitchener, Ont., who works with high school and university students, isn’t surprised that families such as the Browns cobble together solutions allowing their teens to invest using parents’ accounts.
“There’s an insatiable, growing appetite amongst our teens and young adults to learn more about money,” he says, pointing to survey results from the Canadian Foundation for Economic Education indicating that investing is one of the top topics youth want to learn more about.
And no wonder. With soaring student loans, mortgages and personal debt looming on their horizon, finding ways to make more cash is top of mind. “Now add the fact that technology has opened the door to instantaneous stock trading on your phone from anywhere ... and it’s easy to understand the kind of Reddit-fuelled, frenzied trading that we saw earlier this year,” Mr. Masters says.
Yet passing over complete control of an investing account to their children might not sit right with many parents. Fortunately, there’s a more palatable option to help those who would prefer to stay in the driver’s seat during their kids’ childhood and teen years: Open an in-trust account, an informal trust used by adults so they can invest funds on behalf of a minor.
Allison Marshall, vice-president of high-net-worth planning services for RBC Wealth Management in Toronto, says in-trust accounts (sometimes called informal trusts) are often used by parents and grandparents who want their children or grandchildren to get a head start on investing.
Like a registered education savings plan, an in-trust account is opened at a financial institution. But unlike an RESP it can be used to pay for pretty much anything once the child hits the age of majority. Also, there’s no maximum, as there is with an RESP.
In some instances, this is a good thing. Maybe a family has already maxed out the RESP lifetime contribution limit of $50,000 but, after scanning university costs these days, wants to save even more. Or the family wants things to be fair. Why should the university-bound son get money for school, but the socially minded daughter helping to build schools in Central America gets nothing?
In-trust accounts are also much easier to open than formal trusts, and don’t require initial or continuing legal fees.
Then there’s the potential tax benefits. Generally, all income is attributed back to the donor – the parent or grandparent – and must be included in their income and taxed accordingly. However, there are exceptions. If the funds come from Canada Child Benefit payments, or the child’s inheritance, then the child pays the tax – presumably at a much lower rate.
The same goes for any money earned by the child from a part-time or summer job. Their money, their tax.
“Sometimes informal trusts can be for income-splitting purposes,” Ms. Marshall concedes, but more often adults open them just so the children can learn about risk and return.
There is a sweet spot, size-wise, when it comes to in-trust accounts. At least, that’s what Owen Charters, who heads a national charity in Toronto, discovered when he tried to open one for his two boys, ages 8 and 12.
Doing his homework, he found that many do-it-yourself investing platforms required a $1,000 minimum. On one hand, that minimum made buying a handful of Apple Inc. (AAPL) shares, the boys’ top pick, actually doable. On the other, he wasn’t sure he wanted to hand over a thousand bucks to his kids.
“It was a threshold that was a little bit high” for what Mr. Charters thought children of those ages should be playing with.
Marvin Schmidt, founder and senior wealth strategist of Schmidt Investment Group at CIBC Private Wealth Management in Edmonton, says some advisers and institutions will open an in-trust account for a client with a lower minimum. But that usually requires having an existing relationship. The last thing advisers want? “A million $300 accounts sent our way,” he says.
Besides, who wants to tangle with the Canada Revenue Agency over $300? There are tax filing requirements and reporting obligations for these accounts, along with the associated costs if an accountant is brought in. And parents need to keep meticulous records about where the money originally came from.
At the same time, in-trust accounts aren’t meant for extra large sums of money either, says Ms. Marshall of RBC. The legal requirements and paperwork are much less onerous than for formal trusts, so informal accounts are better for smaller financial goals. In fact, if a parent, or child, makes some savvy or lucky investment decisions and the account grows too large, the CRA might want to determine where the money originally came from and if all the supporting documentation is in order. That’s a headache many parents don’t need.
The RESP alternative
Once an in-trust account is set up, it belongs to the child. Period. There’s no way to give the money back to the original donor, even if Grandma’s roof has caved in and she could have used her investment for repairs. What’s more, once children reach the age of majority (which varies by province), they can wind up the trust, take the money and run. It’s theirs. Many young adults would act responsibly, but there’s no guarantee.
It’s one of the reasons that Mr. Masters, the financial literacy expert, prefers that parents use an RESP instead when investing with their kids. Parents have more control over the money when their child reaches the age of majority. Besides, RESPs help kids reach an important financial milestone: a diploma or degree.
“RESPs incentivize the kids in terms of getting that postsecondary qualification, which is so important to thrive financially,” he says. “The dollars are there for that purpose, and it’s an important purpose.”
Mr. Schmidt is teaching his own kids to invest too, but he’s not using in-trust accounts. He wants to retain control longer. He invested $5,000 on his twins’ first birthday in 2009, and vowed never to touch it. They’ve known about the shares since they were age 5 or 6 and can watch the assets balloon and shrink.
“They’ve been following the companies and it’s working very well,” he says.
"Teaching financial literacy shouldn't be lost in all the talk about math destreaming"
The desire to learn more about personal finance is insatiable
June 22, 2021 by Fred Masters, Special to the Waterloo Region Record https://www.therecord.com/opinion/2021/06/21/teaching-financial-literacy-shouldnt-be-lost-in-all-the-talk-about-math-destreaming.html
KIRA VERMOND SPECIAL TO THE GLOBE AND MAIL PUBLISHED AUGUST 3, 2020
When the government of Ontario released its new elementary school math curriculum on June 23, one thing became crystal-clear: Financial literacy was finally in the spotlight.
When Ontario schoolchildren head back to school this fall, they will for the first time be learning everyday financial skills such as how to e-transfer money, the ins and outs of compounding interest, how to determine the cost of loans and lines of credit, and – certified financial planners rejoice – planning for and reaching financial goals. Following the financial literacy guidelines, children in Ontario may actually gain the rudimentary financial planning skills needed to earn, spend and save wisely into adulthood.
That is, if everything goes according to plan. But that’s a big “if.” Even without the questionable timing of rolling out a new plan during a pandemic that could possibly unleash a second wave come fall, there is precedence showing that introducing mandatory financial literacy comes with challenges.
The elementary math update – the first since 2005 – comes one year after the province’s newly revised curriculum for the Grade 10 career studies course. That rollout has been problematic from the start, say some experts.
Launched July 2, 2019, and implemented last fall, the half-credit course represents the first time a financial literacy component has been mandatory in Ontario high schools, rather than merely slipped into elective business or accounting classes.
For Fred Masters, now a retired senior finance teacher at Resurrection Catholic Secondary School in Kitchener, Ont., that 2019 curriculum change – a culmination of countless meetings since 2016 and 29 pilot projects involving hundreds of students – meant an exciting opportunity for young people to learn real-world money management skills at school.
He should know. Before leaving teaching in 2018, Mr. Masters ran a lunchtime personal finance club for students.
“I didn’t know if anyone would give up their lunch period and listen to a teacher talk about money,” he says now. “And they came in waves. The sessions were packed. It was standing room only. Even the staff started to come.”
Now Mr. Masters is a financial literacy presenter, so when his former school board asked him last summer to create the teacher resource package for the financial literacy portion of the revised careers course, he wasn’t surprised. What did shock him was the curriculum document he had to work from.
“There were 19 course expectations in the new careers course, and only three dealt with financial literacy,” he says. “So that was just a huge missed opportunity for all students to learn key skills foundational for a successful life.”
What’s more, much of the financial literacy portion of the new course focuses on developing a post-high-school budget, leaving only five or six remaining hours to teach everything else. Fortunately, budgeting will be covered in Grade 8, according to the new elementary curriculum, so one hopes the students will already have basic knowledge to draw from.
Stacy Yanchuk Oleksy, director of education and community awareness for the Credit Counselling Society in Toronto, says the new high-school curriculum is a start, but would also like to see it cover topics such as how to pay bills and taxes. In other words, the boring but useful stuff – a deeper dive into what students will soon be expected to learn in grade school.
“As much as I appreciate Pythagorean theorem, I haven’t really used it too much in my everyday life,” she says. “We need to teach students really basic life skills so when they get into the world of work, they’re better prepared.”
Fred Masters, a retired senior finance teacher and president of Masters Money Management, developed a teacher resource package for the new mandatory Grade 10 career studies course. Although the curriculum is a first step in helping students become financially literate in high school, he would like to see three further changes: