It's Your Money  

Effectively passing down to your next generation

Family wealth transfers

As we approach the largest intergenerational wealth transfer in history, many Canadians are unprepared for the complexities and responsibilities that come with inheriting significant assets.

This unprecedented transfer, which is already underway, primarily involves the baby boomer generation passing down wealth to their children and grandchildren. It’s estimated more than $1 trillion will be passed on by 2026.

However, without proper preparation, this wealth transfer could lead to financial mismanagement, family disputes, and lost opportunities.

So why are Canadians unprepared?

Lack of financial literacy—One of the primary reasons Canadians are unprepared for this wealth transfer is a general lack of financial literacy. Many inheritors do not possess the necessary knowledge to manage large sums of money effectively (to be fair, many passing the wealth on don’t either). Financial literacy involves understanding investment principles, tax implications, estate planning, and more. Without this knowledge, inheritors may make poor financial decisions that could deplete their newfound wealth.

Absence of open conversations—Many families avoid discussing money and inheritance, often due to discomfort or cultural norms. This lack of communication can lead to misunderstandings and conflicts when the time comes to transfer assets.

Inadequate estate planning—Proper estate planning is crucial for a smooth wealth transfer. Unfortunately, many Canadians either procrastinate or neglect this aspect entirely. Without a well-structured estate plan, including wills, trusts, and power of attorney documents, the process can become complicated, time-consuming, and costly. Additionally, inadequate planning can result in significant tax burdens on the heirs, reducing the overall wealth transferred.

Emotional and psychological readiness—Inheriting wealth is not just a financial event but also an emotional and psychological one. Many individuals may not be mentally prepared for the responsibility that comes with managing significant assets. This unpreparedness can lead to stress, anxiety, and poor decision-making.

What steps can families do now to get prepared?

1. Enhance financial literacy: Families should invest in financial education. This could involve attending workshops, reading relevant books, and/or working with a professional financial planner. Financial literacy empowers individuals to make informed decisions and manage their inheritance effectively.

2. Open family dialogues: Initiate and maintain open conversations about financial matters within the family. Discuss topics such as inheritance expectations, financial goals, and estate plans. This transparency helps prevent misunderstandings and ensures everyone is aware of their roles and responsibilities.

3. Develop a comprehensive estate plan: Work with professionals to create a thorough estate plan. This includes drafting a will, setting up trusts, and assigning power of attorney. A well-structured plan can help minimize taxes, avoid probate, and ensure that assets are distributed according to the benefactor’s wishes.

4. Consider professional guidance: Engage with financial planning, legal and tax professionals. These experts can provide valuable insights and help navigate the complexities of wealth transfer. They can also offer strategies to optimize the inheritance process and preserve wealth for future generations. I must stress here that doing proper due diligence is key to finding qualified professionals and not salespeople that will just try to find ways to sell you things with your newfound wealth.

5. Prepare heirs emotionally: Address the emotional and psychological aspects of inheriting wealth. Encourage heirs to seek support if needed, whether through counselling or mentorship. Understanding the emotional impact of sudden wealth can help heirs manage their inheritance more responsibly.

6. Set Up a family governance structure: Establish a family governance structure to guide the management of family wealth. This can include creating a family council, setting up regular meetings, and developing a family mission statement. Such structures can provide clarity and continuity, ensuring that family values and goals are upheld.

The impending wealth transfer represents both an opportunity and a challenge for Canadian families. By acknowledging the current unpreparedness and taking proactive steps, families can ensure a smooth and successful transition of wealth.

With the right preparation, Canadians can preserve and grow their family wealth for generations to come.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.


Advising your adult children on a first home purchase

First-time home buyers

In today's Canadian housing market, soaring property prices and rising interest rates pose significant challenges, particularly for young adults looking to purchase their first home.

As parents, guiding your adult children through this complex landscape requires a blend of practical wisdom and financial savvy. Here's some advice on how to help them make informed decisions amidst what is quite likely the most challenging environment in many generations:

First and foremost, emphasize the importance of thorough research. Encourage your children to delve into local housing market trends, understanding the dynamics driving prices in their desired area. With housing prices often inflated, it's crucial to assess whether current valuations align with long-term market fundamentals or if they're driven by speculative bubbles.

Moreover, emphasize the significance of financial preparedness. Given the high prices and interest rates, advise your children to assess their financial health realistically. This includes evaluating their income stability, debt obligations, and savings. Stress the importance of maintaining a healthy credit score, as it can significantly impact mortgage eligibility and interest rates.

When considering the decision between buying and renting, urge your children to conduct a comprehensive cost-benefit analysis. While purchasing a home offers potential long-term equity and stability, renting provides flexibility and avoids the hefty upfront costs associated with homeownership. Remind them to factor in not only mortgage payments but also property taxes, maintenance expenses, and potential market fluctuations.

In today's market environment, leveraging government programs can somewhat ease the burden of homeownership. Encourage your children to explore initiatives such as the First-Time Home Buyer Incentive, which allows eligible buyers to finance a portion of their home purchase through a shared equity mortgage with the government.

Additionally, programs like the Home Buyers' Plan enable first-time buyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) for a down payment, providing a valuable financial resource. Emphasize the importance of seeking professional guidance. Encourage your children to consult with a professional financial planner to navigate the financial complexities of purchasing a home. They can provide personalized insights and help identify opportunities and risks specific to their circumstances.

In addition to financial considerations, highlight the importance of long-term planning. Encourage your children to assess their lifestyle goals, career prospects, and family plans when making housing decisions.

Are they fairly confident that they will stay in that city for at least five years? Is their career and income steady? Will they be starting a family soon? A home purchase should align with their broader aspirations and accommodate potential life changes in the future.

Stress the significance of patience and resilience. In a competitive housing market, it may take time to find the right property at a reasonable price. Encourage your children to stay persistent while remaining financially disciplined and avoiding rash decisions driven by FOMO (fear of missing out).

Ultimately, the decision to buy a home in today's market requires careful consideration and informed judgment. With financial literacy still largely absent in our education system, your ability as a parent to provide support, guidance, and practical advice to your children cannot be overstated.

By sharing lessons and experiences (and mistakes) you learned along the way, you can help them navigate the complexities of the Canadian housing market and embark on the path to homeownership with confidence.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Summer plans shouldn’t lead to a fall financial hangover

Vacations on a budget

With inflation impacting nearly every aspect of daily life, planning a summer vacation can seem daunting when money is tight.

A recent Ipsos poll conducted for Global News found 79% of those surveyed “really need” a vacation, 62% plan to take a vacation this summer and yet only 19% could easily afford to take a vacation.

Sometimes, a well-planned getaway is still possible without straining your finances. Here’s a comprehensive guide to help you enjoy a memorable summer vacation while staying financially responsible:

Set a realistic budget—The first step in planning a budget-friendly vacation is to establish a realistic budget. Evaluate your current financial situation, taking into account your income, expenses, and any savings earmarked for travel. Determine how much you can comfortably spend without jeopardizing your financial stability.

Choose affordable destinations—Selecting the right destination is crucial when money is tight. Opt for locations that are known for being budget-friendly. Consider national parks, smaller towns or cities with free attractions. Staycations or nearby getaways can also provide a refreshing change of scenery without the high costs associated with distant travel.

Travel off-peak—Timing your vacation can significantly impact costs. Travel during off-peak seasons, or mid-week, to take advantage of lower prices on accommodations and flights. Summer can be busy but early June or September often have better deals than peak times in July and August.

Plan and book in advance—Booking flights, accommodations, and activities well in advance can lead to substantial savings. Airlines and hotels often offer discounts for early bookings. Use fare comparison websites and set up price alerts to monitor deals. Flexible travel dates can also help you find the best prices.

Utilize loyalty programs and points—Leverage loyalty programs, credit card points or travel rewards. Many credit cards offer travel points that can be redeemed for flights, hotels or car rentals. Joining hotel or airline loyalty programs can also provide discounts and perks that reduce travel expenses.

Consider alternative accommodations—Instead of staying in expensive hotels, explore alternative lodging options such as vacation rentals, hostels, or home-sharing platforms like Airbnb. These options often provide more space and amenities at a lower cost. Additionally, consider house swapping or staying with friends or family to save on accommodation expenses.

Create a detailed itinerary—Having a detailed itinerary helps you manage your vacation budget effectively. Plan your daily activities and meals to avoid impulsive spending. Look for free or low-cost attractions and activities. Many cities offer free museum days, outdoor concerts, or community events during the summer.

Cook your own meals—Eating out can quickly deplete your travel budget. Select accommodations with kitchen facilities and prepare some of your own meals. Visit local markets and grocery stores to experience regional foods without the high cost of dining out. Pack snacks and picnic lunches for day trips to save even more.

Use public transportation—Relying on public transportation instead of renting a car can save a significant amount of money. Many destinations have efficient and affordable public transit systems. Walking or biking can also be cost-effective and allow you to explore the area more intimately.

Look for deals and discounts—Take advantage of deals and discounts available for tourists. Many attractions offer discounted admission fees if you purchase tickets online in advance. There are many websites dedicated to finding discounted rates for local activities and dining. Tourist information centers can also provide valuable coupons and advice on budget-friendly options.

Set sside a contingency fund—While planning your vacation budget, allocate a small contingency fund for unexpected expenses. This ensures that you are prepared for any surprises without derailing your overall financial plan.

Monitor your spending—Keep track of your spending throughout your vacation to ensure you stay within your budget. Use budgeting apps to monitor expenses in real-time. Being mindful of your spending helps you make adjustments as needed and prevents overspending.

Enjoy free activities—Maximize your vacation enjoyment by taking advantage of free activities. Explore nature trails, visit public beaches, attend free local events, or simply enjoy a day relaxing in a beautiful park. These experiences can be just as fulfilling as costly activities.

Planning a summer vacation on a tight budget amid rising inflation requires careful financial planning and smart decision-making. By setting a realistic budget, choosing affordable destinations, and making the most of deals and discounts, you can enjoy a fulfilling and memorable vacation without putting your finances at risk.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.


Canadians’ financial stress continues to climb according to annual index

Financial stress increasing

On May 23, FP Canada released its latest Financial Stress Survey Index, revealing significant insights into the financial well-being of Canadians.

The survey highlighted the growing financial stress among the population and underscores the importance of financial literacy and planning.

The index is compiled annually for FP Canada by Leger and is a measure of how much financial stress Canadians face, the key causes of that stress and steps that are being taken to combat the financial stress that so many face.

I wanted to use this week’s column to highlight some of the key findings of the survey as well as discuss some steps Canadians can take to reduce their financial stress.

Money continues to be top stressor—Driven by a challenging economic environment, elevated grocery prices, inflationary impact on living costs and higher gas prices are key factors contributing to financial stress.

• 44% say money is what tends to cause them the most stress in their lives, more than personal health (21%), work (16%) and relationships (16%).

• The gap continues to widen as money wasalso cited as the top stressor in previous years – 40% in 2023 and 38% in 2022.

• 45% of those surveyed reported their financial stress has increased over the past year.

Impact on mental health—Of significant concern is the impact this financial stress has on people’s mental health. Sixty per cent of those surveyed reported their financial stress has adversely affected their mental health.

• The constant worry about finances has led to increased anxiety and stress levels.

• Young adults (ages 18 to 34) were most affected by financial stress, with 55% reporting higher stress levels quoting factors such as student loans, job stability and housing affordability as the main culprits.

Growing optimism—In the way of good news, despite Canadians continuing to grapple with financial worries, there is a growing sense of optimism as they prioritize financial well-being with a renewed focus on financial self-care.

• 50% of those surveyed expressed increased optimism about their financial future compared to 47% last year, despite higher stress levels. This is not a huge increase but momentum in the right direction considering the external factors people have faced over the last year is encouraging.

• Optimism among young people is higher with 55% of those under the age of 35 feeling more hopeful about their financial future.

• 91% are proactively embracing strategies to reduce financial stress and combat growing economic pressures – common strategies quoted include tracking expenses, paying down debt, saving more and creating a budget.

While not necessarily a pretty picture yet, these results indicate a rise in proactive financial behaviours and demonstrates that Canadians are eager to take charge of their finances.

What can you do? As mentioned above, we are seeing a renewed surge in people taking action to combat the financial stress that they face.

Simple tasks such as creating a budget, cutting non-essential spending and better managing their debt are showing increased traction among Canadians. While there are steps you can take on your own, the study shows a clear difference in stress levels of those that work with a professional financial planner.

Canadians who don’t work with a planner are 23% more likely to have lost sleep about financial worries versus those that do.

Overall, those who don’t work with a professional planner are 33% more likely to be stressed about money.

Looking back at the 44% number quoted above (those who cite money as their top stressor), that same figure drops to 36% for those who do work with a professional planner.

This year’s Financial Stress Survey Index highlights two key themes. First, financial stress is clearly still on the rise which is likely not surprising to many people out there. But second, and more important, we are seeing a rise in people willing to take action to improve their stress and financial well-being.

If you are one of those still sitting on the sidelines and not being proactive, consider what steps you can take today to get back on the right track and improve your financial and mental well-being.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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