November 29, 2022

Donalds Hobby

World Finance Reviews

‘Fear of missing out’ a deterrent to saving money

Canadians are becoming interested in using new technologies as a component of their retirement savings, according to a recent study.

A survey of 207 people in the finance industry commissioned by the Co-operators and carried out by the pollsters at Angus Reid in late December and early January revealed that 52 per cent of them identified cryptocurrency as the most-asked about topic by their clients.

Furthermore, 55 per cent of those polled said they are increasingly being asked to comment on financial information found on the internet.

Brandon-based certified financial planner Kevin Brugger, co-owner of Brugger Wealth Management, acknowledges that cryptocurrencies, like Bitcoin, have suffered some recent losses in value, but said the concept still intrigues people as a possible way to earn money through speculation.

Though there are plenty of tools through which people can invest, save and speculate on their own and potentially save some service fees in the process, Brugger warns that going down the wrong path can lead to disappointment in the future.

“You’re going to save money by doing it, but if you don’t do it right, you’re going to regret it,” he said. “It just takes one bad choice to have catastrophic consequences.”

Whether cryptocurrency is good or bad as an investment tool, Brugger didn’t say. However, he said it could be a good or bad choice depending on what someone’s needs and requirements for savings are.

“Everybody has to assess their own individual situation and decide if they want to speculate,” he said. “That’s truly what a lot of these investments are — pure speculation.”

Another finding of the survey was that 57 per cent of respondents said they felt Canadians believe RRSPs are a tool of the past that is no longer attractive.

The local financial planner doesn’t agree with that sentiment. Brugger believes that RRSPs aren’t just good within a Canadian context but one of the best tax deferral programs within the entire G7, a group of seven countries representing the world’s biggest economies.

While the survey respondents were pessimistic about Canadians’ views on RRSPs, it has been Brugger’s experience that people are increasingly seeing tax-free savings accounts as valuable savings tools.

“Everyone should be utilizing it,” he said, though he had a caveat. “If you’re making one per cent [interest] in a tax-free savings account but you’re paying three per cent [interest] on your mortgage, why are you buying a tax-free savings account. That, to me, doesn’t make sense. You’re better off paying off your mortgage.”

If that money is otherwise sitting in savings, it makes sense to shuffle it over to a TFSA up to your maximum contribution amount.

While people are getting interested in using private equity or cryptocurrency to save for their retirement, Brugger said there’s nothing wrong with continuing to use the methods that have been around for years.

To find the specific plan that works for you, Brugger’s recommendation is to be careful and consider consulting a financial planner.

The Co-operators’ study also raised the issue of Canadians being less interested in savings for retirements in general. A whopping 85 per cent of respondents said they believe young Canadians are too worried about the fear of missing out on things in the present to save for the future.

This manifests itself as people not necessarily losing the ability to save but rather the desire to save, said Chad MacKenzie, a financial advisor and certified financial planner with the Co-operators in Edmonton.

In his work, MacKenzie sees this manifesting in different ways: people being afraid of missing out on money-making opportunities outside of RRSPs, people looking at getting rich quick options, people seeing success through DIY investment opportunities and more.

“No one wants to be taken advantage of,” MacKenzie said. “We hear about fees, so we start thinking ‘maybe I should just do it myself and I can save a bunch of money in the long run and it’ll work out without using an advisor,’ which, simply put, isn’t typically the case over a long or short term.”

Another obstacle MacKenzie has noticed is that with the upheaval of the last few years including the pandemic, people are hesitant to lock money away in savings in case of a crisis. Sometimes, confusion over the rules surrounding contributions and withdrawals from RRSPs and TFSAs can contribute to this.

Like Brugger, he recommends anyone unsure of their best course of action or looking to learn more about finance contact a financial advisor.

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