May’s finance news is a reminder that there are endless ways to make you part with your money — whether or not it’s of your own volition. While Canada’s insanely hot housing market continues to dominate the news cycle, the quiet desperation of households increasingly unable to meet their monthly financial obligations is bringing affordability to the forefront. Here are last month’s highlights:
If a $200 emergency came up, would it blindside your bank account? According to a recent Ipsos poll, more than half of Canadians are that close to not being able to pay their bills each month. Global News reports the survey, conducted on behalf of accounting firm MNP, found that almost 40% of Canadians regret the debt they’ve taken on in the past year, and that 31% don’t earn enough money to meet all of their financial responsibilities. The real kicker: about 60% of respondents said they don’t have a firm grasp of how interest rates affect debt repayments. As Grant Bazian, president of MNP’s insolvency practice, told Global: “That’s how so many end up in an endless cycle of debt.”
Here’s why understanding interest rates is so important: When record-low interest rates start to rise (and they will), so will your mortgage payments. According to the CBC, some homeowners could see their monthly bills go up 10% if mortgage rates increase by as little as one percentage point. Unfortunately, a recent Manulife survey found 72% of homeowners would have trouble making their mortgage payments if that happened.
Manulife’s survey echoes a lot of the same sentiments as the Ipsos one: Many Canadians are living on the brink of affordability and don’t have enough (or any) savings to weather financial emergencies. Millennials in particular are feeling the squeeze: Manulife’s survey found 45% of respondents age 20-35 have the highest amount of outstanding mortgage debt, yet one-quarter have no savings.
Millennials might see ourselves as technologically savvy (I write this as a member of the beloved cohort), but our apparently lax attitudes toward privacy and security (as well as openness and optimism for the sharing economy) make us prime targets for tech-based scams. The Financial Post shares five financial cons that prey on those with a “sharing with less caring, and clicking with less checking” attitude, including fake job offers that ask you to send money upfront (red flag!) or cash cheques and wire payments (when the bad cheque inevitably doesn’t clear, you’re on the hook). Don’t think you’re susceptible? Read the article — some of them are sneaky.
As wild weather floods become the norm across the country, the CBC reports many Canadians don’t know the limitations of their home insurance policies and are caught off-guard when disaster strikes. Water damage is the most common insurance claim in Canada, but most policies only cover incidents like burst pipes or overflowing bathtubs, not overland flooding or sewer backups. Insurance companies have only recently started offering flood coverage as an add-on, available at an additional cost. As the CBC puts it, “if you didn’t sign up for it, it’s likely you don’t have it.” You should know exactly what you’re covered for — if you don’t, check your policy or talk to your insurance broker.
Another scam making its way around: Frankenstein fivers. Most fake bills circulating in Canada are $20s and $100s, but CTV News reports the RCMP is warning of a “splice and tape” scheme where counterfeiters replace the clear panel and embedded holographic strips on $5 polymer bills with clear plastic tape and fin foil. Investigators suspect the real clear panels are being used for higher-denomination fakes, while the altered $5 bills go back into circulation. Check your wallet — unfortunately, you won’t be reimbursed for fake cash (authorities say this would encourage counterfeiting), but anyone with a fake banknote is advised to turn it in to police or a bank.
Stay tuned to this space: On June 6, we’re celebrating Canada’s 150th birthday by releasing 150 facts about money in our fair country, ranging from historically significant to modernly bizarre tidbits on banking, real estate, currency, the economy, business, insurance, the stock market, and wealth.
On June 13, Ratehub.ca is partnering with the Digital Media Zone at Ryerson University for the panel discussion Canada 150: The Future of FinTech. Alongside several expert panelists, Ratehub.ca co-founder and CEO Alyssa Furtado will discuss how big banks and Canadian fintech companies and big banks can better partner together to build technology and deliver convenience, and the big ideas that will change the way we interact with money over the next 150 years and beyond.