Council for Families

Making Cent$ for families

An Introductory Guide to Money Issues for Professionals Working with Families

Money Cent$ for Families bc council for families 1

Contents

2 Introduction BUDGETING 5 Get control over your personal finances 5 Needs and wants 7 The cost of convenience 9 Getting a handle on the cash flow 12 Practical tips to curb spending 13 Plan for emergencies and future goals 14 Money saving ideas 16 Resources

BANKING 19 Banking Basics 20 ABCs of Accounts 22 ATMs, PINs, cheques and passwords 24 A little bit of savings leads to a secure future 28 Balance your spending register 29 Have a complain about the bank? There’s help! 30 Resources

CREDIT 34 Facts about credit 37 Types of credit 40 The cost of paying minimum 42 A matter of interest 43 The ins and outs of credit history 44 Relevant pages from a sample Equifax credit report 46 Sample TransUnion credit report 48 Steps to building or rebuilding credit 49 Co-signing is risky 50 A plan to get out of debt 51 Debt reduction or settlement companies 52 Collection agencies: what’s legal and what isn’t 53 Is bankruptcy the only option if debt is out of control? 54 Resources

CONSUMERISM 57 What’s your relationship with spending and shopping? 58 Need or want? 58 Clever advertising promotes consumerism and impulse shopping 61 Steps to overcoming consumerism 64 Targeting the young ones 65 Resources

Money Cent$ for Families bc council for families 1 Introduction

he root of most financial problems is lack of or weak budgeting skills. More and more Canadians are feeling stressed about their money situation. As economic times become tougher, attaining control over personal T finances becomes even more critical and will contribute significantly to reducing stress.

The root of most financial problems is a lack of knowledge about personal finances. This lack of or weak grasp over financial know-how is not limited to a certain part of the population. A surprising number of smart and competent Canadians have let go of good financial sense and control. Taking charge of money and life and becoming aware of choices one needs to make to get to where one wants to be is a key step to gaining financial control and confidence.

Many of your clients are likely struggling with not only managing money well but also with understanding the confusing world of personal finances. The next few modules will help you help them understand money and their relationship with it. The four modules on budgeting, banking, credit and consumerism are primarily geared towards you, the facilitator. They contain information in simple, easy to understand language and many practical tools on reducing financial stress. Each module has accompanying worksheets for you to share with your clients. Feel free to share the tip sheet with your clients if you feel they will benefit from it. Support them through this process as dealing with financial issues is never easy. A lot of hidden emotions may surface as clients uncover their personal feelings and attitudes towards money. However, by using the tip sheet and completing the activity, clients will start to feel more comfortable with money and will likely feel more hopeful about their future through an improved understanding of the place and role of money in their life which will ultimately lead them on the path of sound financial health. They will realize that personal money management is simple, and the key to achieving the results they want. They will learn tools on how to fix existing money problems and how to avoid future mistakes from occurring.

2 bc council for families Money Cent$ for Families Budgeting {Budgeting}

Get control over your personal finances

The root of most financial problems is a lack of or weak budgeting skills. Knowing what money is being spent on and when and how much money is coming in or going out is key to gaining financial control. Budgeting

Tracking earnings and expenses is fundamental to budgeting. A good majority of us do not track money as it can be uncomfortable - one has to confront the truth about one’s spending habits. And often times the reality exposes one’s weaknesses.

A second area of weakness is not being able to tell the difference between needs and wants. When everything gets classified as a “need,” there’s a problem. A third important area, often ignored, is good organization and planning. A system dictates that receipts are verified, reconciled and filed away. This helps with creating a good budget and having a budget helps with future planning.

The next few pages discuss practical steps for getting a handle over personal finances. Specifically, we will go over tools and ideas on how to manage money better.

needs and wants Pay attention to how people speak, and it won’t take more than a few moments to hear someone say, “I need XXX.” The word need has crept into the vocabulary and has replaced want. Consequently, it has become easier to justify needless spending. Look for these cues in the families you work with. Do you hear them saying, “I bought another pair of XXX because I needed them!” when they have many pairs already? Help them figure out the difference between a need and a want. This will be their key to reign in over out-of-control spending.

Everyone wants to indulge in “wants” from time to time. But over indulgence has consequences on personal finances. Most of the purchases add superficial value to life and nothing more. Over indulgence not only hurts the pocket but also negatively impacts relationships and health. Remember, unreasonable and over-consumption impacts the environment.

Basic human needs are food, shelter and clothing. These can become “wants” if one eats out a lot or spends extravagantly on clothing. Engage the whole family in this conversation. When children learn early on about needs and wants, they are likely to make smarter financial choices in the future.

Need Something one needs to “survive” Want Nice to have but not needed for survival

Food Eating out or expensive cuts of meat

A car in good condition that fits the budget Cab rides or an expensive car purchased and takes one from point A to B with financing

Borrowing to finance education Racking up credit cards to pay for trips, dinners out, clothes, etc.

Money Cent$ for Families bc council for families 5 Worksheet: I Am In Control Of My Finances My spending log for a week

Use this spending log to track whether you are spending too much money on “wants”. Get the whole family involved. Collect receipts. Enter each item into the log as a “need” or “want” by placing the total in the correct column. First review the difference between needs and wants. Budgeting

Now start with what was purchased, for how much and whether it was a need or a want.

Item Cost of need Cost of want

1 $ $

2 $ $

3 $ $

4 $ $

5 $ $

6 $ $

7 $ $

8 $ $

9 $ $

10 $ $

11 $ $

12 $ $

13 $ $

14 $ $

15 $ $

Total $ (A) $ (B)

If there are more wants than needs, there’s a problem! Next time, before buying, ask, “Is this a need or a want?” The answer will determine whether to spend or not.

6 bc council for families Money Cent$ for Families The cost of convenience

Think of how many times we thoughtlessly waste a dollar here and a dollar there? Let’s review the cost of wants and commit to finding an alternative way of doing things. Or even better, what would be the financial benefit if one were to give up some of these habits? Help your clients understand that budgeting and saving Budgeting does not always mean making sacrifices. Sometimes, it means changing the way one does things. Let’s see how.

Canadians bought 1.5 billions cups of coffee in 2010 (Globe and Mail, 8th November, 2011). Let’s use this common habit as an example to show how much money one can save by doing things differently.

Mohammad drinks 3 cups of coffee a day. each cup costs $1.50 (approx)

Had Mohammad saved this money at 2% interest rate, Cost of coffee per Calculation Cost (0% interest) he would have…

Day $1.50 x 3 cups per day = $4.50

Year $4.50 x 365 days = $1642.50 (A) = $1675.35 in 1 yr

10 years $1642.50 x 10 years = $16,425 = $20,346.81 in 10 yrs

50 years $16,380 x 50 years = $82,125 = $146,121.03 in 50 yrs

Calculator source: http://www.moneychimp.com/calculator/compound_interest_calculator.htm

If Mohammad starts buying good quality coffee beans to grind at home and prepare his own coffee, here’s what it would cost him.

Calculation Result

Cost of one pound $25. One pound makes approx 81 = totals cups per pound of coffee 81 cups of coffee

Cost per cup $25/81 = 30 cents/cup

Cost of coffee per year $.30 x 3 (cups/day) x 365 (days) = $328.50 (B)

Savings per year $1,642.50 – $328.50 (B – A) = $1,314 per year

$1314 is the cost of convenience for Mohammad pays each year! A dollar saved here and there really does add up!

Money Cent$ for Families bc council for families 7 Worksheet: I Am In Control Of My Finances Three habits I spend a lot of money on

List three habits that you spend a lot of money on and follow the worksheet to calculate the yearly cost of these habits.

Budgeting 1: 2: 3:

Calculation Cost

Habit 1: Cost per day: $

Cost/week (cost per day x 7days): $______x 7 days = $ (A)

Cost/year: $______(A) x 52 weeks = $ (B)

Habit 2: Cost per day: $

Cost/week (cost per day x 7days): $______x 7 days = $ (C)

Cost/year: $______(C) x 52 weeks = $ (D)

Habit 3: Cost per day: $

Cost/week (cost per day x 7days): $______x 7 days = $ (E)

Cost/year: $______(E) x 52 weeks = $ (F)

Total Cost/Year (B+D+F) $ (G)

Imagine, if this money was saved and earned compounding interest? Visit http://www.moneychimp. com/calculator/compound_interest_calculator.htm to calculate savings using various interest rates and time frame.

$______(G) savings per year At 2% interest rate, At 3% interest rate, I would have… I would have…

Savings in 10 years… $ $

Savings in 10 years… $ $

Savings in 25 years… $ $

8 bc council for families Money Cent$ for Families Getting a handle on the cash flow

Cash flow tracker is simple. It tells one when the money is coming in, from what sources and how much and when money is going out and on what. Having this knowledge will help your clients feel in control and prepared. It will reduce stress in their lives. Plus, it will ensure that they have enough money to cover upcoming Budgeting payments and therefore, help to avoid expensive service fees, such as overdraft and NSF.

There are two types of expenses. Fixed expenses: These expenses stay the same month to month. Examples are, rent/mortgage, utilities, loan, insurance, etc. These can change if one was to, for instance, move to a lower rent apartment, but once the move is done, the rent becomes fixed cost again as it doesn’t change each month. Variable expenses: This is where one has the most flexibility but this is also where one loses most control. Examples are: eating out, gifts, clothes, trips, etc.

When working on the cash flow statement the first time, set aside a couple of hours. Come prepared to the table with paper, pen, bills, receipts and calculator.

Remember, some expenses may only occur once a year (e.g. home or tenant insurance). In this case, take the amount paid annually and divide it by 12 months to get a monthly figure.

Example: Tenant insurance: $250 a year $250 / 12 months = $20.83 per month

Most people get paid every two weeks. If the pay is deposited every 14 days into the account, for example, every second Friday, take the deposit amount and multiply it by 26 weeks, which is the number of times this person will get paid in a year. Next, divide the result by 12 to get the monthly amount.

Example: Bi-weekly pay: $850.00 (after tax, i.e. net pay) $950 x 26 = $22,100 per year (net pay) $22,100 / 12 (months) = $1,841.66 a month

Money Cent$ for Families bc council for families 9 Worksheet: I Am In Control Of My Finances Cash flow statement

Fill out a cash flow statement each month. Compare progress against previous month and challenge yourself to do better next month.

Budgeting Income Total Deposit Date Net (after tax) income $ Partner’s net (after tax) income $ Other income (alimony, child support, other) $ Other income (HST credit) $ Other income $

Total Income: $ (A)

Fixed Expenses Identify also if it’s a need or a want Cost Need Want Housing Mortgage/rent $ Property tax $ Rental/home insurance $ Condo fees/maintenance $ Heat $ Hydro $ Cable $ Landline $ Internet $ Debt Bank loan 1 payment $ Bank loan 2 payment $ Student loan 1 payment $ Student loan 2 payment $ Car loan $ Taxes owing $ Insurance Car insurance $ Life insurance $ Health/dental insurance $ Savings Savings $ Emergency fund $

Total Fixed Expenses: $ (B)

10 bc council for families Money Cent$ for Families VARIABLE EXPENSES Identify as need or a want Cost Need Want Cell phone $

Childcare $ Budgeting Gas and/or bus pass/tickets $ Medicine $ Car repair/maintenance $ Groceries $ Eating out $ Other entertainment (movies, magazines, etc.) $ Allowance $ Charity $ Personal care (hair cut, etc.) $ Clothes $ Gifts $ Smokes/alcohol $ Vacation $ Membership (gym, club) $ Hobbies $ Bank fees $ Credit card 1 payment $ Credit card 2 payment $ Money owed to friends /family $ Total Variable Expenses: $ (C)

Total: Income – Expenses (A – B – C) $ (D) #: #:

If (D) is positive: That’s good news. Save the surplus or build an emergency fund. If D is $0: You are breaking even, but living pay cheque to pay cheque. If an emergency happens, where will the money come from? Start cutting expenses. If (D) is negative: This means financial trouble. Do a serious review of expense, cut spending and balance the budget. Next, get it on the positive side.

If the balance is negative, balanced or just slightly positive, you need to act. Cut or reduce variable spending. Take lunch to work, review cable choices, etc. Review needs and wants: Are you spending more on wants than needs? Review choices and decisions you make about your purchases. Cut unnecessary spending. Get a 2nd (or 3rd) job: The ends have to meet, so if spending can’t be cut, then work an extra job. This means that you might be working all the time. Is spending money worth forsaking rest and time with family? What about the impact on health?

Money Cent$ for Families bc council for families 11 Practical tips to curb spending

Tracking expenses is an important step towards attaining financial control. If saving is perceived as an accomplishment– a positive feeling - rather than a sacrifice, it becomes easier to save. Budgeting Every choice your client makes has a consequence. One choice could be leaving more money in their pocket. The other could lead to more debt. Share the following ideas with your clients on what actions to take to spend less so that they can start saving towards future goals. Involve the entire family in this discussion so that children can learn how to resist the temptation to spend as well.

Leave cards at home: Freeze them or lock them up or cut them. In short, keep credit and debit cards out of sight (and wallet!). Come back tomorrow: If malls tempt one to spend, stay away. Before entering the store, ask, “Is this a need or a want?” Walk away, think and listen to oneself. Carry small amounts of cash: Leave home without cards and with only a $10 or $20 bill in the pocket. That’s the maximum one will spend, even if tempted. Challenge oneself: Push oneself and see how long one can make the money last. If $5 lasts one day, make it last two, and so on and so forth. Keep doing that until one forgets that one is even carrying money. Limit visits to the ATM: In the good ol’ days, people went to the bank once or twice a month. They Get organized and planned their expenses, knew exactly how much they needed and withdrew that amount from the keep track • Note down every penny spent. bank. Try to live in that world. Seeing it in writing puts spending Think of money in terms of hours worked: Mark gets paid $10/hour. After tax, he gets in perspective. Daily, review how approximately $8.50/hour. He wants to buy a Canucks jersey priced at $120 + HST = $134.40. He much was spent and on what. will have to work 15.81 hours ($134.40/$8.50) to be able to afford the jersey. That’s two days of Ask self, was it necessary to work! Not so tough to decide anymore, is it? spend the money? Could it Allocate funds and stick to the plan: Allocate money to major items in the budget after pay gets have been avoided? deposited. Use jars or envelopes. Once all the money from the jar (or envelope) is finished, stop. Do • Keep receipts and tally them not take money from another jar (or envelope). Keep track. as soon as statements arrive Set up PAP for savings: Have an automatic transfer set up for money to come out of the chequing in the mail. Call the bank or account for deposit into the savings account. One doesn’t miss the money that doesn’t stay in the credit card company if there is chequing account. any discrepancy. Yes, banks can make mistakes! It is customer’s responsibility to catch and report them.

12 bc council for families Money Cent$ for Families Worksheet: I Am In Control Of My Finances Plan for emergencies and future goals

When you plan, you will automatically focus on the needs rather than the wants. Unless it is an emergency (even then you can be financially prepared) most events in life don’t just happen suddenly. Getting married, buying a car, going to school, buying a home…all happen over time. Having a plan helps to be financially Budgeting prepared. Unfortunately, most people buy first and plan later. Help your clients create a plan, save up and then spend on their goal. Emphasize that saving a little bit is better than not saving at all. Start small and soon the savings will build up.

Goals can be short-term (one to three months), medium-term (about six months) or long-term (one year or longer).

• Example of a short-term goal is saving for next month’s bills. • Saving for next semester’s books could be a medium term goal • A long term goal could be buying a car in three years

Here’s an example of goal setting:

Short-term goal Mid-term goal Long-term goal

Goal Pay next month’s bill buy next semester Buying a car (utilities, loan…) Save for books to

Cost $500 for all bills $500 for all books $6,000 and other materials

Time frame 1 month 6 months 3 years

Saving per month $250 deposited into $500 / 6 months = $6,000/36 months = savings on pay day until $50/month saved for $167/month saved bills are due 6 months into “car” savings account My goal Short-term goal Mid-term goal Long-term goal

Goal

Cost $ $ $

Time frame

Saving per month $ $ $

Money Cent$ for Families bc council for families 13 Money saving ideas

After rent, the next biggest expense for a family is usually childcare and/or groceries. The grocery bill cannot be cut completely, but there are definitely ways to reduce the bill. Every extra dollar in your client’s pocket is helpful. Budgeting

The Scanning Code of Practice, which is a smart way to get free groceries. Even though it’s advertised in many places in a store, most consumers are not aware of it. Show them the sticker and advise them to look for it near the cash register, customer service or the entrance. Using examples, explain how the Code can put money into their pocket. To benefit from it, however, they must know the prices of items purchased and verify that they were charged the incorrect price on the receipt.

Smart grocery shoppers: • Know their prices and do comparison-shopping. • Go prepared with a list and coupons to the store. • Eat before they go shopping in order to resist being tempted by aroma of freshly cooked goodies. • Buy items on sale and make efficient use of coupons. • Stock up on non-perishables. But they don’t spend a bundle when doing so or it may throw them off budget. Buying in bulk or a sale item or using a coupon and not paying for it in full defeats the purpose. • Buy just enough perishables so that they don’t go to waste. Throwing away unused, expired or rotten perishables is like throwing money into the garbage. • Use store brand products rather than brand names. • Bring their own bags rather than pay for bags in store. • Stay on the periphery of the store. “Need” items, such as vegetables, milk, meat, eggs, etc. are usually on the outside while “wants” like, snacks, birthday cards, etc. are found in the inner aisles. • Take a calculator with them to compare cost per unit. o A 400 gms box of cereal for $3 is more expensive than a box of 900 gms box of the same cereal for $6. Why? o Divide $3 by 400 gms = $0.0075/gram and $6 by 900 gms = .0066/gram. At $3 for 400 gms, one is getting less for their money. • Buy a cheaper cut of meat. • Go shopping early in the morning. A lot of items with a fast approaching “best before” date are generally discounted 10% to 50%. • Check out “reduced to clear” section of the store. Savings can be up to 50% of the regular price for items found here. • Buy items from the bulk food section as generally they are cheaper than packaged goods.

14 bc council for families Money Cent$ for Families fact Scanning Code of Practice If the scanned price of a non-price item is higher than the shelf price or any other displayed price, the customer is entitled to receive the first item free, up to a $10 maximum. Budgeting What is a Non-Price Ticketed Item? A non-price ticketed item is any bar coded merchandise that does not have a price affixed to the merchandise. What Happens if Two or More Identical Non-Price Ticketed Items are Incorrectly Scanned? Customers are entitled to the first item free (up to a maximum of $10) and the subsequent item(s) at the correct price.

Source: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01262.html

Money Cent$ for Families bc council for families 15 Resources

some suggested books and magazines (Don’t buy books; borrow them from the library!) • The Complete Idiot’s Guide To Personal Finance In Your 20’s, 30’s Budgeting • The Complete Idiots Guide To Managing Your Money • Personal Finance For Canadians For Dummies • Managing Your Money All-In-One For Dummies • Personal Finance Workbook For Dummies

websites http://idiotsguides.com/static/quickguides/businesspersonalfinance/organize_your_budget.html http://www.squawkfox.com/ http://www.dummies.com/how-to/content/choosing-a-budget-method.html http://yourmoney.cba.ca/students/inside/budgeting/ www.gailvazoxlade.com www.mymoney.gov www.moneysense.ca http://practicalmoneyskills.ca/ www.smallchangeaddsup.ca http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01262.html http://www.ctvbc.ctv.ca/olsen/ http://www.alwayssavemoney.ca/ www.alwayssavemoney.ca

tv shows • ‘Til debt do us part • Princess • CTV Steele on your side

calculators http://www.moneychimp.com/calculator/compound_interest_calculator.htm http://practicalmoneyskills.ca/calculators/saveamill.php http://practicalmoneyskills.ca/calculators/budget.php

16 bc council for families Money Cent$ for Families {Banking} Banking

Money Cent$ for Families bc council for families 17

Banking basics

ven though we use banks or credit unions regularly (“bank” is used as the generic term to represent both banks and credit unions), many Canadians don’t completely understand how service fees work, why a bank puts a E hold on cheques and what type of accounts to open, etc. When you speak to the families you work with, help them to understand their rights and responsibilities related to banking and accounts. Use the worksheets throughout this module to inform parents of their rights and responsibilities and also to empowers them with the tools needed to understand the banking system and speak confidently with their banker.

When using the material provided for you and when giving out tip sheets, keep in mind that money is a very sensitive issue for most. Many families may not want to

reveal that they are struggling, and even if they do, they may not be comfortable Banking sharing with you that they either don’t have the tools to manage money or are unable to manage money with whatever tools they have available. These families are likely to pay more for financial services, make critical mistakes and demonstrate high levels of frustration at the lack of understanding shown by their banks.

The objective of this module is to help these families realize that the banking system can be used to their advantage. Even though it may appear that banks hold a lot of sway that is not necessarily true. As customers, we can exercise our rights. The key is to have the knowledge about the rights we enjoy and the responsibilities we have as bank customers.

Money Cent$ for Families bc council for families 19 ABCs of accounts

Although many families will already have a bank account, it’s likely that they don’t understand how their account works. This section explains some of the details related to types of account and terms used by banks and how families can save on bank charges. For example, many low income earning individuals and families: • End up paying higher service fees by conducting a lot of transactions and having the wrong account package. • Pay NSF by not keeping track of what transactions are expected to occur in the next few days. • Have a “hold” status on their account because their credit may not be great or they don’t use their account properly, e.g. overdrawn account, Non-Sufficient Funds (NSF), etc.

This section will help answer some of these questions and ideas on good account

Banking management.

Bank accounts are a right in Canada. Banks cannot refuse to open an account unless it suspects or confirms that: • The account will be used to commit fraud or illegal activities • The customer has a history of fraudulent or illegal activity in relation to financial services in the last seven years (this information is contained in the credit report). • The customer has knowingly provided false information or made false statements.

Banks do have the right to decide what type of account (savings or chequing) they will open for a customer. This decision is based on credit history (for more information on credit history, refer to the section on Credit). At account opening time, banks will ask for two pieces of identification. Some of the commonly accepted IDs are listed below. A potential customer must present two or at least one ID listed in column A and one ID from column B.

Column A – Photo ID Column B – Photo or non-photo ID

Canadian driver’s license Provincial government issued health card

Canadian passport Credit card issued in Canada

Canadian Citizenship or Canadian National Institute for the Blind Permanent Resident card ID card with picture and signature

Immigration Canada Form IMM 1000 or Canadian birth certificate IMM 1442

Government issued Certificate of Indian Status A foreign passport

* Most banks will not accept Social Insurance Number (SIN card) as ID

20 bc council for families Money Cent$ for Families Banks cannot demand a letter of employment or statement of income to open a personal account FACT unless one is applying for a loan. Banks offer several types of accounts. Shop around for the best Government cheques deal. Ask questions to find the best account. Remember, the customer is the king or queen and Any Canadian with or without without customers, banks cannot exist. Some common accounts types and terms are described below: a bank account can cash a government issued cheque, such as social assistance, Savings account: This account is for savings and earns interest but limits the number of free pension, child tax benefit or transactions allowed per month. income tax refund of up to Chequing account: This is a transaction account for everyday transactions, such as, writing cheques, $1500 at any bank as long paying bills or shopping (point of sale or POS). Review the number of transactions conducted per as they show two acceptable month - cheques, bills, withdrawals, debits, etc. and then choose the best package that costs the pieces of ID. least but meet all transaction needs. Joint account: A savings or chequing account can be opened by two or more individuals and allows them to make withdrawals, deposits, payments, etc. All account holders are responsible to keep the account in good standing. Youth and student account: Different banks and credit unions may consider anyone under the

age of 19 or 25 as “youth.” Youth account offers a lot of freebies. Most banks will also offer free Banking accounts to students. Ask the bank about who qualifies. Senior’s account: Different banks use different ages to qualify a customer as a “senior,” which entitles a senior customer to a lot of free benefits. Check with the bank for the qualifying age. Pre-authorized payment (PAP): A PAP is a convenient way to make bill payments or to save money. It can be set up as a recurring or one-time bill payment or a transfer of money from one account to another. Make sure that there are sufficient funds to cover the bill payment or transfer otherwise a NSF penalty may apply. Non-Sufficient Funds (NSF): Writing a cheque or setting up a future transfer or bill payment when there isn’t enough money in the account to cover the transaction results in NSF. The NSF fee can start at $20 and go as high as $80 so it’s best to keep track of upcoming payments, transfers or cheques and ensure that there are sufficient funds in the account. Hold: Suppose a customer deposited a cheque for $500. If the bank “holds” the cheque, it will not allow the customer to withdraw the $500 deposited. It will be held for 7 or more days while the bank verifies that the party who wrote the cheque has the funds available. Go in your branch to make deposits so the teller can look a the cheque and decide whether to hold it or not. Avoid using an ATM as it cannot differentiate between a cheque and cash, hence, it will automatically put a hold on the deposit, which the branch employee will not be able to override.

Money Cent$ for Families bc council for families 21 ATMs, PINs, cheques and passwords

ATMs are a great convenience. 95% of debit cardholders use ATMs (source: www.interac.ca). However, ATM transaction fees can add up to a lot of money. Encourage parents to: • Use their own bank’s ATM to minimize cost • Plan ATM withdrawals so they are only withdrawing once a week to avoid extra service fees • Understand ATM confidentiality

Many families you work with, due to their vulnerable situations, may share more than they need to with others about their bank accounts. If you suspect that, help them understand their responsibility related to sharing PINs and passwords. This section also addresses the issue of cheque safety and fraud which many low- income individuals fall victim to because they trust easily and do not completely

Banking understand how the system works.

ATMs are convenient as they can be found everywhere. However, each ATM transaction counts as a transaction. When a customer uses an ATM that does not belong to his/her bank, the cost of this service can be very high.

For example, Chang’s account is at Bank A but Bank B or a no-name ATM machine is nearby. By using Bank A card on Bank B or a no-name ATM, Chang will get charged by both institutions as shown below:

Withdrawal Service fee Balance

Withdrawal amount $20.00

Charge by Bank A for using Bank B -$1.50 $18.50 (or no-name) ATM

Charge by Bank B (or no-name) -$1.50 * $17.00 for using Bank A card on it This is an estimate. Actual charge could be more.

Final amount in Chang’s pocket $17.00

22 bc council for families Money Cent$ for Families keeping accounts safe and secure There are some commonsense principles to keeping accounts safe and secure. Confidentiality: Do not share passwords or PIN with those whose name is not on the account. If they commit fraud, the account holder will be held responsible. Use passwords and PIN that are hard to guess. For example, address, birthdays and anniversaries that are easy to guess don’t make for good passwords. Hide information in public places: Cover the machine when entering your PIN or password at ATMs, POS or public computers so that others can’t see it. Use trusted ATMs, point-of-sale and computers: Do not use a computer or ATM if you are not sure about its security. If a POS machine at a store seems broken or tampered with or just plain suspicious, do not use the debit card there. There have been cases where fraudsters have tampered with debit machines and intercepted encrypted data to get access to customer’s bank accounts. When an account is compromised and it’s not the customer’s fault: Contact their bank right away so it can determine fault. For example if a customer uses their debit card at a POS and later finds out that all funds from the account have been withdrawn, the bank customer will be reimbursed if s/he

is not at fault. However, if they loaned the debit card to someone and shared then PIN with them or Banking didn’t have proper security on their computer, then the customer is responsible for the loss.

cheques While cheques are a convenience, they are also a source of fraud. Below are some ways to protect cheques and how to detect cheque fraud: • Leave cheques at home. Do not carry them in the wallet or purse. Inform the bank right away if they are lost or stolen and request a “stop” to be put on it. This means that the bank will put a note on the account stating that “cheque numbers so and so” should not be honoured in case someone tries to cash them. • Never give a blank cheque to anyone. “Void” it, i.e. put lines across it, before giving it to someone so that it cannot be misused. • Do not sign a blank cheque. • Always put a name, such as, “Mohammad Khan”, on the cheque rather than writing “cash.” If a cheque written to “cash” is lost, anyone finding it can cash it. • When a customer deposits a cheque into his/her account, the bank assumes that the customer knows the entity that gave them the cheque and that it will clear. If the cheque doesn’t clear, the depositor becomes responsible to cover the funds. • When accepting cheques, make sure that the person or business giving the cheque can be financially trusted. • Overpayment scam is a common type of fraud. Here’s an example: John sells a watch on Craigslist for $50 but the buyer sends him a cheque for $500. The buyer calls John apologizing for the mistake and requests that John mail him a cheque for $450, the over paid amount. John does as advised and meanwhile, deposits the $500 cheque in his account. Two days later, the bank calls John and tells him that $500 cheque from the buyer did not clear, i.e. it was a fraudulent cheque. His account is now overdrawn. Result: John lost his watch, the $450 he sent to the buyer and incurred service charges for overdrawing the account. • Do not cash cheques for others on your account. For example, Reema, a first-year university student gets approached by a nicely dressed young man who tells her that he has lost his debit card and therefore, is unable to cash his pay cheque of $1000. He offers to pay Reema $100 for cashing his cheque. Reema agrees and after cashing the cheque using her account, takes $100 and hands over $900 to the stranger. Three days later, the bank calls Reema and informs that the cheque was fraudulent and that $1000 was debited from her account to cover the cheque amount. Reema is now on the hook for $900 ($1000 cheque minus $100 service fee she was paid) as well as all of the other fees associated with the overdrawn account.

Money Cent$ for Families bc council for families 23 A little bit of savings leads to a secure future

Often time, individuals and families believe that saving a small amount is not worth the effort and that a few dollars saved will really not make much of a difference in their current or future situation. This misunderstanding acts as a barrier to a secure and less stressful future. When discussing savings, focus less on the amount and more on the habit. As savings grow, so will the motivation to save more.

A second area to focus on is everyday habits that we thoughtlessly spend money on. These small habits and the money spent on them add up to a lot. A cup of coffee, a bag of chips from the corner store, the costly phone plan that isn’t being used to its fullest, etc. are all things that when combined together become a substantial amount. This money can instead be diverted to savings.

Depending on one’s goal, there are many vehicles available for saving money. Often parents

Banking underestimate how much money they will need for their child’s education. Many also don’t realize that the money they will get as CPP or OAS will not be enough for them to lead a good quality life. Having savings in RRSP will help complement government pension. This section discusses savings options and identifies the benefits of each.

Can one get ahead financially by saving $5 a week or $20 a month? Yes!

Every penny put into a savings account or another type of investment takes one closer to their goal. Also, this money is a good way to build an emergency fund if money is needed suddenly. Having an emergency fund minimizes financial stress.

$240 saved every year Savings in Savings in Savings in 10 years… 25 years… 50 years…

If one didn’t save anything, $0 $0 $0 they will have…

If savings were put in a piggy bank $2,400 $6,000 $12,000 at home, one would have…(A) ($20 x 12 months ($20 x 12 months ($20 x 12 months x 10 years) x 25 years) x 50 years)

In an account earning 3% $3,125.66 $9,450.06 $28,929.52 compounding interest rate, you will have…(B)

You are ahead by…(B – A) $725.66 $3,450.06 $16,929.52

Calculator source: http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Think of how many times a day one spends a dollar here and a dollar there. All those dollars spent here and there, when added together, can add up to an astounding amount. Start small. Aim for saving $10 a month. $10 a month is better than nothing at all. Each individual needs to come up with an amount that is realistic for him or her to save. Share this information with the family and help them understand the benefits of savings, no matter how small.

24 bc council for families Money Cent$ for Families Worksheet: I Am In Control Of My Finances The power of compounding interest

Complete the following worksheet to see how compounding interest can impact your savings. Use the calculator available at: http://www.moneychimp.com/calculator/compound_interest_calculator.htm

$______saved every year In 10 years, In 25 years, In 50 years, I will have… I will have… I will have…

If I didn’t save anything, $0 $0 $0 I will have…

If I saved $10 a month and $ ______$ ______$ ______put it in my piggy bank at home, (Monthly amount (Monthly amount (Monthly amount I would have…(A) x 12 months x 12 months x 12 months x 10 years) x 25 years) x 50 years)

In an account earning 3% $ ______$ ______$ ______

compounding interest rate, Banking I will have… (B)

I am now ahead by…(B – A) $ ______$ ______$ ______

Now add an extra $10 to the amount saved above and see money grow faster!

$______saved every year In 10 years, In 25 years, In 50 years, I will have… I will have… I will have…

If I saved $10 a month and $ ______$ ______$ ______put it in my piggy bank at home, (Monthly amount (Monthly amount (Monthly amount I would have…(A) x 12 months x 12 months x 12 months x 10 years) x 25 years) x 50 years)

In an account earning 3% $ ______$ ______$ ______compounding interest rate, I will have… (B)

I am now ahead by…(B – A) $ ______$ ______$ ______

Money Cent$ for Families bc council for families 25 simple interest formula principal amount x interest rate x time invested for = amount earned in interest

compound interest formula principal amount x (1 + interest rate) time invested for = amount earned in interest So, what vehicle should one use for savings? The answer depends on what the savings are for. For general savings, GICs and Canada Savings Bonds are good options. RRSPs are a good retirement tool while RESP is an excellent option to save for a child’s future.

guaranteed investment certificate (gic) or term deposit Offered by the bank, each bank requires a different minimum amount of investment. A GIC could be started with $500 at some banks. Advantages: Encourages savings. Very safe and secure. Disadvantage: Earns a very low interest rate.

Banking canada savings bonds (csb) Issued by the federal government, these guarantee an interest rate for a specific number of years. Savings can start with the purchase of a $100 bond. Banks starts selling CSBs around November. CSBs are actual pieces of paper that must be kept safe as they have to be produced at the time the bonds are cashed. Advantages: Encourages savings. Very safe and secure. Disadvantage: Earns a very low interest rate.

registered retirement savings plan (rrsp) RRSP is savings specifically for one’s retirement. This account can be opened at any bank. As one saves money in RRSP, the saver receives a tax refund. The amount of tax refund depends on the saver’s income and amount saved in RRSP. The Notice of Assessment received from Canada Revenue Agency after filing of income tax shows how much money one is allowed to save in RRSP each year. When money is withdrawn from RRSP, one has to pay tax on it. In old age, as earnings are low (Canada Pension Plan and Old Age Security), when the account holder withdraws money from the RRSP account, the amount of tax paid on the withdrawal is low. Advantages: Tax benefit. Suppose an individual pays 20% in income tax and saves $1000 in RRSP this year. S/he will get 20% (or $200) of it back as tax benefit. Disadvantage: Penalty applies, if withdrawn prior to retirement.

26 bc council for families Money Cent$ for Families registered education savings plan (resp) This is a savings account opened at a bank to save for a child’s future part-time or full-time education or training. Here’s how it works:

Parents’ Savings Government’s Contribution

First $500 in RESP savings Canada Education Savings Grant, a federal Government program, entitles the child to receive $200 in the RESP account (yes, free money!)

Next $2000 in RESP savings Government will deposit up to $400 in RESP account a year. Yes, free money again!

Maximum amount allowed to be saved The government will deposit a maximum of $7,200 in child’s RESP account: $50,000 in the child’s RESP account over its lifetime.

This includes the $400 deposited each year. Banking

The government will give the Canada Education Savings Grant only until the child is 17 years of age. Any extra savings after this age will not qualify for the Canada Education Savings Grant.

If a child was born after December 31, 2003 and the family currently receives National Child Benefit Supplement, then when the family opens a RESP account, the child could qualify for an additional $500 through the Canada Learning Bond.

The child could also get an extra $100 per year up to age 15, as long as the family continues to receive the National Child Benefit Supplement. More information can be obtained at the bank or by calling 1-800-O Canada (1-800-622-6232)

Advantages: You are not only saving for your child’s education but you your child is able to receive up to $7,200 in Canada Education Savings Grant. The child may even qualify for an extra $2,000 as Canada Learning Bond. Disadvantage: None!

tax free savings account (tfsa) TFSA can be opened at any bank and unlike RRSP, which can only be used for retirement, savings in TFSA can be used for anything. Maximum savings limit per year is $5000. Money grows in this account tax-free, i.e. the saver does not have to pay interest on the income (i.e. interest). Advantage: One doesn’t pay tax on interest earned. Disadvantage: None!

Money Cent$ for Families bc council for families 27 Balance your spending register

Not keeping track of where money is going, how much of it is going out and when and how money is coming in, makes one lose control of personal finances. If your clients seem lost about where there money is going, encourage them to start writing down their expenses by carrying a notebook and pen with them and entering the amount, date and details of every item they spend money on. The benefits of writing down spending are multiple: • Seeing in writing what money is being spent on, is an eye opener and can put money habits into clear perspective. • This is a good exercise for budgeting purposes. • Writing makes one more accountable to oneself about spending habits. • It helps with staying on top of upcoming bill payments and avoid unnecessary banking fees.

Banking Keeping track of transactions is one of the key elements to reduced financial stress and avoidable fees. • Keep note of spending and earnings. Keep a notebook with two columns. First column is for debits (spending) and the second column is for credits (earnings). Keep transactions slips. This includes keeping track of ATM and debit card transactions. • On a daily basis, add up all debits and credits to get an idea on how much money is left over. • Check the balance against bills payments due or cheques written to ensure that there is enough money in the account to cover future payments. • Tally debits and credits against the monthly statement. If good records were maintained, the debits and credits from the notebook should match the debits and credits on the monthly statement.

Below is a sample list of some debit and credit transactions.

Debit Credit

Money going to savings account Pay deposit

Purchases made on debit card Refunds on returned items

Bill, loan payment, etc. GST, child tax benefit, tax refund, etc.

Cheque to pay rent, etc. Other cash/cheque deposited into the account

28 bc council for families Money Cent$ for Families Have a complaint about the bank? There’s help!

Many low-income individuals and families feel that they are not being treated right by their bank. To help your clients overcome this feeling, empower them with knowledge about their rights. We have already discussed bank customer responsibilities. Now let’s discuss rights and how to fight for those rights. step 1 Prior to lodging a complaint, consider the following questions: • Is it a service or a product issue? • Did the system or a person cause it? • What is the problem? • What needs to be done to find a satisfactory resolution? • Gather details about the problem: names, dates, time.

step 2 Next, while going through the resolution process:

• Stay calm and be polite to get results. Banking • Note down names of the people on the phone or in the branch who are helping. Note down dates and time of conversations with them. Also make notes of what was discussed. • Be reasonable in expectations and be open to compromise. • Keep note of what was promised.

step 3 • Speak to a representative at the bank: Communicate issues clearly and concisely. If needed, escalate to a supervisor or manager. • Contact regional or area manager: If still unsatisfied, ask for info on the area or regional manager. Again, keep track of conversations, date, time, etc. • Seek help from the Bank’s Ombudsman: If the problem still persists, contact the bank’s Ombudsman. Every bank has an Ombudsman who, in a fair and impartial manner, looks into customer complaints. Ask the bank for its Ombudsman contact information. Provide the Ombudsman’s office names, dates, time, and a summary of conversation at each step • Credit unions don’t have an Ombudsman’s office. Contact the CEO instead and provide appropriate details of the issue. • Seek help from the Canadian Banking Ombudsman: If still unsatisfied, write to the Canadian Banking Ombudsman. Check www.cba.ca for info. Give details: names, dates, time and what happened.

Money Cent$ for Families bc council for families 29 Resources

websites www.cba.ca http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html http://www.canlearn.ca/eng/saving/CESG/brochure/cesg.pdf http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/hw-eng.html http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/menu-eng.html http://www.gailvazoxlade.com/articles.html

calculators http://www.moneychimp.com/calculator/compound_interest_calculator.htm www.smallchangeaddsup.ca Banking

30 bc council for families Money Cent$ for Families {CREDIT} Credit

Money Cent$ for Families bc council for families 31

hile a lot of money decisions are based on logic, many other money decisions are purely emotional. We feel upset, hopeless, sad or question what the point of making sacrifices is when it won’t change W much in life. So we spend. To cover spending, we work or borrow more, and most of the time, we do the later. The spiraling effect of unpaid bills and debt makes us more stressed, which impacts the quality of our lives. It’s a vicious cycle, not impossible, but difficult to get out of.

Many of your clients are sadly trapped in this vicious cycle. Their debt keeps piling up and they feel helpless or out of control. If one debt gets paid, they end up with another and another. Credit is a powerful tool if used wisely. It can also be a source of immense stress if used foolishly. How it’s used depends on the user.

Most Canadians are not aware of how credit works. This lack of knowledge does not affect a particular income or educational level. It affects them all. Most people feel embarrassed to ask for help once they get into trouble due to misuse of credit. Asking for help is okay. If you become aware that the families and individuals you work with use credit, educate them regardless of whether they use it well or not. If they use it responsibly, becoming more knowledgeable about it will reinforce their good behaviour. There is a very high likelihood that those who manage credit well may do so because they have heard some horrible stories of how others who got in debt and had a very difficult time getting out of it. Or they may have been taught well by their families to avoid getting into debt. It is highly unlikely that they manage credit well because they understand the ins and outs of credit. Credit Before embarking on a conversation about credit, it is important that you cover the topics of budgeting. You may also want to go over the topic of Consumerism first before you discuss credit. Having an awareness and practice of planning, organizing, needs vs. wants, goal setting, and the effects of consumerism on our lives, will act as a foundation to understanding credit and the benefits of using it wisely.

Money Cent$ for Families bc council for families 33 Facts about credit

Below are some pros and cons of credit. What often is an advantage easily becomes a disadvantage if credit is used unwisely. Make clients aware of uses and misuse of credit. Also, help them become more knowledgeable about some rules that will help them to reign in their credit usage. Lastly, help them figure out exactly how much they owe to who and at what cost (interest rate).

Benefits of using credit cards Disadvantages of credit cards

Don’t have to carry cash Not using cash leads to losing track of how much and what money is spent on

Some cards can protect against fraud If balance is not paid in full, debt can mount in case the card is lost or stolen quickly and interest can be costly

Allows access to 24/7 shopping Access to credit 24/7 can lead to uncontrolled shopping habit

Comes in handy during an emergency. By making minimum payment, credit card debts E.g. if car breaks down, one can use credit can take many years to pay in full to get it repaired right away

Helps build credit history Irresponsible usage can damage history

Some golden rules to remember about credit:

Use credit cards wisely: Each time when deciding to use credit, ask, “Will I be able to pay off this purchase in full at the end of the month?” If the answer is “no,” stop. Know your “needs” and “wants”: Ask, “Is this a need or a want?” Pay on time and more each month: Paying the minimum will cost a lot more than what the item is Credit actually worth. Pay in full or as much as possible. Avoid carrying balances. Never be late or skip payment: This will negatively impact credit history and could lead to a higher interest rate or a reduction in credit limit (or both) or the card being cancelled. Protect your credit card information: Deal with reputable businesses only. Never provide your credit card number, expiration date or the security code in response to an unsolicited phone call, e-mail or other communication. Do not apply for credit to get a gift: Credit tempts one to spend more than one can afford. If this happens, the gift received may not be worth much compared with the interest paid on unpaid balances or the stress of spending more than one can afford. Interest rates: If paying off the balance in full is not possible each month, then opt for a lower interest-charging card. Additional fees and costs: As shown below, there can be many “hidden” costs, which are hidden in small print on the forms a customer signs when applying for credit. Some examples of the cause and effect of these costs are:

34 bc council for families Money Cent$ for Families Cause “Hidden” costs kick in when one… Effect The credit card company may…

Misses a payment Increase interest rate

Makes a purchase in another country in a Charge a conversion rate that is higher than the foreign currency normal foreign exchange conversion rate

Is late with making payment or goes over their limit Charge a late payment or over limit fee

Gets a cash advance against credit card Charge a transaction fee. Interest is calculated from the day cash was advanced

Types of credit cards: There are many different types of cards, so be sure to shop around. Generally speaking, bank issued cards are less expensive than merchant-issued cards. For example, bank credit cards may charge an interest rate that varies from 5.99% to 21.99%. By comparison, merchant issued cards can cost around 29.9% in interest! Credit

Money Cent$ for Families bc council for families 35 Worksheet: I Am In Control Of My Finances My Credit Cards and Loans List

Use the following table to create a complete list of all your credit cards and loans. Once you have filled in all your information add up the total to see just how much you have owing.

Issuer’s name Interest Credit limit Outstanding Payment due rate balance date

1 $ $

2 $ $

3 $ $

More than 3 loans and credit cards? You are risking your financial health! Continue…

4 $ $

5 $ $

6 $ $

Still have more to list? You need to get serious about taking charge of your finances

7 $ $

8 $ $

9 $ $

Credit Total Owed (credit cards and loans) $ $

Total $ $

36 bc council for families Money Cent$ for Families Types of credit

Credit cards are the most well-known type of credit and most often the cause of people’s credit problems because they cost a lot in interest. However, there are other forms of credit, which also land people in financial difficulties. Some charge very high interest rates and some low rates. Educate your clients about what form of credit will work best for them in case they must borrow. line of credit • Given by banks, it can either be tied to chequing account or can be a separate account. It offers a certain amount of credit limit. The owner of this account can write cheques, make debit purchases, etc. and at the end of the month, pay the full amount borrowed or at least the minimum or any amount in between. It is a cheaper way to borrow as the interest rate is usually lower than what a credt card charges. • While credit cards charge a higher interest rate, the line of credit charges a much lower interest rate which is tied to the prime rate (Bank of Canada prime rate). The rate can be as low as prime plus 1% to 3%. • Since the rate is low, it means that only those with good credit will be able to take advantage of it. • The disadvantage of a line of credit is that because the interest rate is so low, some people tend to lose discipline and control and use it as an ATM to withdraw money from it for unnecessary expenditures. • Another disadvantage is that your line of credit interest rate can go up and down as Bank of Canada changes its prime-lending rate. When interest rates go down, borrowing becomes cheaper and it becomes tempting to spend more. The more we spend, the more problems we are creating for ourselves, as this debt is not free. It has to be paid back with interest. However, the prime rate is not guaranteed, and once it starts creeping up, people who borrowed against their line of credit have a very difficult time paying off the balance.

overdraft • It is tied to one’s chequing account and serves the same function as a line of credit. • There may be a fee attached to having overdraft on the account. Credit • Depending on the bank, there may be no fee except if overdraft is used. • Interest rate is much higher than the line of credit.

loan It can be a car or RRSP or other type of loan. Each month, the loanee pays the bank the agreed upon amount by the due date. While the banks want to get the minimum payment, they will not stop the loan customer from paying more.

mortgage When one wishes to purchase a home, they apply for this type of loan. It is generally a large amount and requires good credit to get a low interest rate. The borrower pays a fixed amount back each month. • Each lender will have different terms and conditions on how quickly one can pay back. • There are penalties for overpayment or breaking the contract.

Money Cent$ for Families bc council for families 37 buy now pay later (bnpl) This is one of the worst types of credit available in the market. It can cost substantial amounts of money if the borrower is not disciplined in paying it back before the payments kick in.

BNPL allows one to buy what they want right away and not pay for a certain time period, such as, one year. No business can survive if customers don’t make payment right away. So, what’s the catch to BNPL? • Interest rate can be as high as 30%. • Setting up BNPL is not free. There is a set up of $40 or so and it has to be paid now. • HST cannot be put on BNPL plan. It has to be paid at the time of purchase.

FACT So that was the now part. Let’s look as the later part of the BNPL story. What is the legal interest rate ceiling in Canada? Carla and Scott recently got married and moved into their new home. They saw a dining set they Section 347 of the Criminal liked. The price tag was $2000. The salesperson advised BNPL: they can buy now, enjoy the dining Code of Canada allows for the table, not make any payments for two years and at that point, they will get a statement reminding maximum legal interest rate to them to start paying. “Good idea,” Carla and Scott thought. be 60%. This could include a broad range of fees and expenses The salesperson left the most important piece of information out: If Carla and Scott start making charged under a loan. payments after the first two years of no interest, no payments, i.e. starting year three, 30% interest will be charged from the date the purchase was made, not from the date when the first payment is due! Credit

38 bc council for families Money Cent$ for Families Year Amount Cost of interest Total Total cost on the per year at 30% first day after the first payment is due

If the full payment is made before the 2-year no interest, no payment period:

Year 1 $2,000 $0 $2,000 $0 as the purchase has already been paid off in full*

If the payments start after 2-year no interest, no payment period, then interest will be calculated from the date the purchase was made two years ago:

Year 1 $2000 $600 $2600

Year 2 $2600 $780 $3380 $3380*

* Set up fee and HST will be additional costs and are not included in this amount

Here’s how interest was calculated…

Cost of interest in year one Total cost in year one

Purchase price x Interest rate Purchase price + cost of interest (A) $2000 x .3 = $600 (A) $2000 + $600 = $2600 (B)

Cost of interest over two years Total cost over two years

Cost from year one (B) x Interest rate Cost from year 1 (B) + cost of interest in year 2 (C) Credit $2600 x .3 = $780 (C) $2600 + $780 = $3380 (D)

Final cost Add HST + set up fee + (D) to get the final cost $240 + $50 + $3380 = $3670

Therefore, the best option for Carla and Scott, if they had to use BNPL, would have been to save $83.33 each month ($2200 / 24) and pay the full balance off before the two years were over.

payday loan It is a short-term loan that helps cover expenses until the next payday. Once the administration fee, interest rate and all other kinds of costs (set up fee, broker fee, rollover fee, etc.) are added up, the borrower could be paying up to 60% in interest! Generally speaking the borrowed amount is payable within two weeks, which also happens to be the next time the borrower gets paid. Due to the high interest rate, it is very difficult to pay off this debt.

Money Cent$ for Families bc council for families 39 The cost of paying minimum

Yes, the credit card statement does mention the “minimum” that one is required to pay. Many people who pay only the minimum find it impossible to get out of debt and unfortunately, when they don’t see any difference being made on their debts, they give up trying.

Help your individual and family clients figure out the actual cost of paying the minimum and how it hurts their pockets. Use the worksheet as an incentive to show how paying more can actually make a difference and help them get out of debt faster.

Mr. Chow’s car broke down and the repairs cost $1000. As he never set up an emergency fund, he had to charge it to his credit card. If he only paid the minimum each month, guess how much it will cost Mr. Chow and how long it will take him to pay off the debt in full? Let’s see. But first, remember, minimum amount is a requirement, not the rule.

If Mr. Chow paid If Mr. Chow paid If Mr. Chow paid the minimum $30 $40 ($10 more) $50 ($20 more)

Interest rate 19% 19% 19%

Interest payment $432.90 $283.10 $97.28

Total cost $1432.90 (A) $1283.10 (B) $1097.28 (C)

Time it will take 4 years 2 years and 9 months 11 months to pay off bill

Credit Savings in cost $149.80 (B-A) $335.62 (C-A)

Calculator source: http://www.fcac-acfc.gc.ca

If Mr. Chow pays an extra $10 or $20 a month, he will reduce his interest payment by more than half! Also, he will be become debt free faster!

That’s significant savings of time and money!

40 bc council for families Money Cent$ for Families Worksheet: I Am In Control Of My Finances The cost of paying minimum

Use the calculator available at http://www.fcac-acfc.gc.ca to figure out how much it would cost if you only paid the minimum. Increase your minimum payment by at least $10 each month and see how much you will save and how quickly you will pay off your debts.

Loan or credit Interest Outstanding Paying # of Paying # of card name rate balance $10 per months $20 per months bill will and years bill will and years save me shaved save me shaved

1 $ $ $

2 $ $ $

3 $ $ $

4 $ $ $

5 $ $ $

If you have more than 5 credit cards you have too much debt.

6 $ $ $

7 $ $ $

8 $ $ $

9 $ $ $ Credit

10 $ $ $

Total $ $ $

Money Cent$ for Families bc council for families 41 A matter of interest

Most consumers don’t know the expensive consequence of leaving small, unpaid balances on their credit cards. Credit cards companies find innovative ways to increase their profits by making it very expensive for balance carrying customers to pay off their debt. Help your clients, especially those with the discipline to pay off most of their balances but leave a small amount unpaid each month, understand that when a partial payment is made on a credit card, interest is calculated on the opening balance for the month (the larger balance), not the closing balance, which would be smaller as one would have made a payment. Let’s see how.

Every dollar left as unpaid balance on a credit card costs big money. Credit card companies do not calculate interest on the unpaid balance; they calculate it on the entire starting balance! Here’s an example:

• Each month Raj pays off his credit card bill in full. His ending balance, after payment, is always $0. • Last month, Raj spent $300 on his credit card. Since Raj is disciplined, when he got paid, he put aside $300 in cash to pay the credit card bill on the 15th. • On 10th of the month, Raj had a very bad toothache. He went to the dentist, which cost him $100. He took $100 cash from the money saved for the credit card payment and paid his dentist. He now has only $200 cash left. • On the 15th, he paid $200 towards his credit card bill instead of $300. He figured he was okay as he had at least paid most of the bill off.

Well, not so. And here’s why. • When Raj made a partial payment on his credit card, next month interest will be calculated on the opening balance of the previous month for the month, i.e. $300 not the closing balance, which was $100. • This means that it will cost him more to pay off his debt. If Raj did not manage his money well and Credit he continued to do this month after month, he would be in big financial trouble.

42 bc council for families Money Cent$ for Families The ins and outs of credit history

Most people are not aware of the existence of credit history and if they are, it seems elusive. However, if there is one step that anyone can take to start the process of rebuilding their credit or maintaining it, it is to check their credit history every year. Encourage your clients to do so. The person requesting the history has to fill out a form, supply two acceptable IDs (one government issued picture ID and one bank or utility statement with current address on it) and mail it to the address on the form. Help them understand the contents of the history as it can be difficult to interpret the first time a person reviews it.

A credit history is a “file” about one’s credit. Before a bank, credit card company or store gives credit, it checks the borrower’s financial past and present, such as payment history, debts, etc. The history contains information from the past 6 years. If satisfied, credit will be granted. If unsatisfied, the application with either be rejected or a much smaller amount than initially asked for will be approved or a very high interest rate may be charged.

Be aware that bad credit can result in a landlord refusing to rent. However, no one can look at credit history without one’s consent. Follow these steps to maintain good credit: • Keep the number of applications for loans, credit, etc. to 2-3 per year. Do not apply for unnecessary credit. • Make payments on time. Make payments at least 3-5 business days before it’s due. • The most responsible habit is to always pay in full. If one cannot pay the full amount, then pay the maximum possible. Avoid only making the minimum payment only.

Creditors are basically looking for the 3C’s in a borrower’s credit application and file. 1 Character: Creditors want to know if the applicant can be trusted. In other words, does the history show that the person pays on time, does not have too much debt, does not apply for credit often and has stable employment and residence? 2 Capital or collateral: Creditors want to see whether the applicant has assets, such as real estate, Credit savings, investments, etc. that can used to repay debt in case s/he defaults. 3 Capacity: Does the applicant have enough income to afford a loan or credit card? Is there too much owing to other creditors that’s reducing the ability to pay the one they’re applying for?

There are two credit bureaus in Canada that collect, maintain and update credit information. Obtain credit history by mail free once a year. It is the consumer’s responsibility to notify the credit bureau in case there are any inaccuracies.

1. Equifax Canada Inc. 2. TransUnion Canada P.O. Box 190 Jean Talon Station Consumer Relations Centre Montreal, Quebec H1S 2Z2 P.O. Box 338, LCD 1 Telephone: 514-493-2314; 1-800-465-7166 Hamilton, Ontario L8L 7W2 Fax: 514-355-8502 Telephone: 1-800-663-9980 Website: www.equifax.ca Fax: 905-527-0401 Website: www.transunion.ca

Money Cent$ for Families bc council for families 43 Relevant pages from a sample Equifax credit report Credit

44 bc council for families Money Cent$ for Families Credit

Money Cent$ for Families bc council for families 45 Relevant pages from a sample TransUnion credit report Credit

46 bc council for families Money Cent$ for Families Credit

Money Cent$ for Families bc council for families 47 Steps to building or rebuilding credit

While building or re-building good credit takes a long time, wrecking credit only takes a short time. If your clients have no credit or bad credit, there’s hope for them. Credit history can be changed by having a plan and exercising discipline and patience. Suggest options that work best for them. secured credit card • A secured credit card means that the applicant provides, for example, $500 or more as a “deposit” to the bank in return for a card with a credit limit of $500. • Good credit history is built with regular use, timely payments and possibly full balance paid off each month. • After 12 months or so of regular use, bank may review credit history and decide to give back $500 deposit plus interest earned and issue a regular “unsecured” credit card.

department store or gas station credit card As most department store or gas station credit card charge a high interest rate of 29% or so, it is easier to qualify for them. Remember though that since the interest rate is very high, every attempt must be made to pay off the balance in full each month.

rrs loan Registered Retirement Savings Plan is a smart way of saving for the future. The borrower makes monthly payments on time over a period of one year. It is important to take the full year to pay the loan off. Do not pay it off quickly as credit is built over many months. By paying quickly, you will miss an opportunity to build good history. Since the interest rate is low, it won’t cost an arm and a leg to finance this loan.

find a co-signer If obtaining credit is nearly impossible, ask someone with good credit to co-sign a loan or credit card. Remember, by doing so, they are putting their credit at risk if you don’t pay on time. So: Credit • Do not exceed credit limit. • Do not miss any payments. • Never be late.

No one, but the owner of the file (you), can build or rebuild credit history. Other agencies can help with information and guidance, but the ultimate responsibility of paying bills on time, not applying for new credit, not carrying balances, etc. is with the owner of the account. As good habits take over, bad information from the credit file gets purged. The key item to remember when rebuilding credit is that it takes time - six years at least - and one will have to be dedicated, committed and disciplined to repair credit.

48 bc council for families Money Cent$ for Families Co-signing is risky

Many families and individuals on low-income rely on their close circle of family and friends for emotional support. This makes them vulnerable to exploitation or they may turn a blind eye to what is obvious. They may also not want to jeopardize their relationship by refusing to help or they may sincerely want to help the other person as they can empathize with them, hence, they don’t say “no” when they are supposed to.

Help your clients understand that one needs to protect oneself from damage and harm while empowering the other person. Empower your clients and help them empower the other person(s) with knowledge about options available to deal with the situation.

Leah is recently separated and has two young children. She was in an abusive relationship where her partner controlled money and financial decisions. She doesn’t have a credit card. She wants to obtain one, but because she doesn’t have any credit history, she isn’t able to qualify for one. She asks her friend, Keisha, to co-sign her application.

We all go through difficult situations in life where we need someone’s to help. In Leah’s case, it is better for Keisha to advise her on options available to her to build her credit – secured card, RRSP loan, store card – than to co-sign with her. Why? If Leah was unable to make timely payments, it would impact the Keisha’s credit as she is the co-signer.

In many cases, young adults ask their parents to co-sign for them or apply for a loan on their behalf with the promise they will pay the parents back. It doesn’t turn out like this all the time. If the irresponsible child doesn’t pay at all or misses payment, the parents are on the hook. Not only do they have to pay back the card/debt but their credit is also ruined. Credit

Some very important questions to ask when someone makes a request like this are: • Why is this person not able to qualify for a loan or credit card on his/her own? • Could it be because they have poor credit and who is to blame for it? • If they didn’t care about messing up their own credit, why would they care about mine?

Money Cent$ for Families bc council for families 49 A plan to get out of debt

Ever wondered how our grandparents survived in households where generally the man worked and the woman was a stay-at-home mom? For starters, they didn’t have access to credit. They planned and saved for their purchases. No money, no buying of “stuff.” Simple as that.

Easy access to credit has brought along its own share of problems. When one is on limited income, the choices one makes about money become even more critical. Each dollar has to stretch more and when it doesn’t, sometimes, one borrows to make ends meet. This becomes the start of a nasty cycle where one has to keep borrowing to make ends meet and to pay off old debts. This section gives some ideas on how to how to get debt in control by applying some simple steps.

Buying on credit and taking out unneeded loans creates unnecessary financial stress. People who spend beyond their means and want access to everything now end up in financial mess. A good debt plan includes difficult choices, working extra and spending less so that one can get back on track to being financially healthy.

Below are some ideas on how to come up with a plan to get out of debt. • The plan needs to be reasonable and achievable. o For example, with a $2000 a month income, it is impossible to put away $1000 towards debt repayment each month. The plan will fail before it is even put it into practice. • Make a list of all debts. Include amounts owed, due dates and interest rate charged. • Tackle the highest interest charging loan or card first. Then, pay off the card or loan with the next highest interest. Keep doing that until the entire list is paid off. • Combine debt at a lower interest rate. This means putting all debts together and asking the bank for a consolidation loan at a rate lower than what the credit card was charging. Reducing Credit interest rate will mean more money will go towards paying off the original debt rather than servicing interest. • Transfer balances to a lower interest charging card. This is similar to a consolidation loan, except that the low rate promotion on the new card may not last forever. Make sure to understand how long the low rate offer is valid for and pay off as much debt during that time. Make sure one doesn’t acquire new debt during this time just because the interest rate is low! • Pay more: preferably a lot more than the minimum. • Make multiple small payments during the month. Don’t wait for the due date. Pay as soon as there’s cash available to avoid spending it elsewhere. • Stop using plastic and live on cash. • Make a budget and stick to it. Keep ‘needs’ and ‘wants’ in perspective. • Put a timeline to the plan. Put a start and end date. Make oneself accountable when deviating from the plan.

50 bc council for families Money Cent$ for Families Debt reduction or settlement companies

While in financial trouble, stress often makes it difficult to think things through. This is a time when one needs guidance, someone who can think logically and give good, step-by-step advice. Encourage your clients to seek help. It is better to come out in the open and deal with the money and debt issue than to hide and make it even worse.

BC Credit Counselling (BCCC) is a not-for-profit agency which helps with budgeting and debt problems. There are many for-profit agencies in the market as well but they charge high fees and deliver what BCCC delivers for free. Encourage your clients to speak to their banker or a case manager at BCCC.

1 If one is unable to manage debt on their own, they can apply to a debt management program with the BC Credit Counselling (BCCC), a non-profit organization. BCCC is able to provide most services over the phone across the province. Contact them at: Suite 330 - 435 Columbia St, New Westminster, BC V3L 5N8 Toll free: 1-888-527-8999 E-mail: [email protected] Website: www.nomoredebts.org/ 2 Speak to a representative at the bank about money problems. They might have ideas on how to handle debt and get out of it. 3 Speak to friends and family who one trusts, who has good money habits and who is willing to give sound advice.

There are many for-profit debt agencies claiming they can get people out of debt. However, they charge a hefty fee. Save this money and put it towards reducing debt. Most of the times, they will give ideas that are easy to implement on one’s own. For example: Credit • They show how to budget. This can be done on one’s own. Use the Cashflow Statement to keep track of expenses and income. • They help to consolidate debts. One can go to his/her bank and inquire about how to do this. • They may suggest applying for a lower interest rate card. One can apply for a credit card on their own. Remember, these agencies have no say who the credit card company qualifies for a card. • They may be able to work out a deal with the creditors that will allow one to pay back only a part of what is actually owed. BCCC provides the same service for free. Or one can, call their creditors on their own and negotiate a payment plan to pay off debt. • They might claim that they can help rebuild one’s credit history. That’s not possible. No amount of money can help rebuild credit history overnight. Only the owner of the credit history can rebuild his/ her credit by practicing discipline, restraint, patience and diligence. • They may ask for non-refundable fees up front. Why would one pay them first if there is no way of knowing the results will be good or if one can do the same oneself?

Money Cent$ for Families bc council for families 51 Collection agencies: what’s legal and what isn’t

Just because a person messed up does not mean they don’t have rights . Many people feel intimidated by the high-handed tactics of collection agencies. As few consumers are aware of consumer rights, they end up believing everything the collection agency tells them. Or they simply ignore the call which makes the matters even worse than they already are.

FACT Debt collector calling hours Collection agencies are governed by BC laws and must be reported if they use In BC, the debt collector: illegal means. Empower your clients whose money problems have escalated to the Can call you on Sundays between point that they are receiving calls from the collection agency with this knowledge. 1:00 pm – 5:00 pm and between 7:00 am – 9:00 pm on other days. Collection agencies are companies that get involved once the bank or credit card company has failed They cannot call on statutory to get payment from the borrower. Getting calls from collections means that the credit rating and holidays. Source: score of that person have been seriously compromised. www.consumerprotectionbc.ca a consumer has responsibilities • Don’t ignore the call. Collections agencies won’t give up if one avoids them. In case they can’t get hold of the person they are looking for, they may start contacting friends, family or even one’s workplace. • Note the date and time of call, who one spoke with and what was agreed upon. • Ask them which account they are calling about and what is the outstanding amount. • Agree to a payment plan as the debt must be paid back no matter how much one dislikes it. • Never send cash. Pay by cheque or money order. Keep proof (copies) of payments. • Don’t give them any contact information that they don’t need to know about. For example, don’t share information on salary, employer address, names or phone number or address of friends/family. The more information you give them, the more ways they have to connect with you.

a consumer has rights Credit • Even though they do, debt collectors are not allowed to call friends, family or workplace and discuss one’s money issues with others unless one has given them the consent to do so. • If their call comes at an inconvenient time, set up an appointment for a later time. Be available to take the call at that time. • They can’t use threats, intimidation or abusive language. If they do so, note the name of the company, the person calling, date and time and report them to Consumer Protection BC. This rule applies in reverse if the consumer is being abusive, intimidating or threatening. • Collection agencies cannot call incessantly. That’s considered harassment. • They cannot force anyone to pay more than what they owe.

52 bc council for families Money Cent$ for Families Is bankruptcy the only option if debt is out of control?

Due to lack of awareness, people often think that if debt becomes unmanageable even after every effort has been made to control it, then the only option available to them is bankruptcy. That is not true. There are many other options available that are less damaging to one’s credit. In many abusive relationships, the threat of bankruptcy hangs like a Damocles sword over the vulnerable partner. The controlling partner, to avoid paying child support or alimony, misrepresents the fact to benefit themselves. Help your clients understand what is or isn’t covered under bankruptcy.

If you hear clients say that they have maxed out credit cards or are borrowing from credit cards, family, etc. or are applying for new credit to stay afloat, they are in deep trouble. Their financial trouble may have escalated to a point of needing professional intervention. This section addresses options available to a person who is at the end of his/her rope.

debt management program Speak to the BCCC first, a not-for-profit organization. Its qualified professionals provide free advice to solve debt problems. Typically debts are consolidated into one affordable monthly payment to be paid over a certain time period. Creditors usually support people who enter into this program by reducing or eliminating interest charges.

consumer proposal If one receives regular income and is able to make payments, then a bankruptcy trustee, for a fee, can help with making a formal “proposal” to the creditors. The repayment schedule can be as long as five years. The difference between a debt management and a consumer proposal is that under a consumer proposal, there is an immediate “stay of proceedings.” This means creditors cannot start or continue any collection action against the consumer as long as the proposal is accepted and Credit payments are made on time.

bankruptcy Bankruptcy is not the best option and here’s why: It seriously impacts the credit history for a long time: A bankrupt person gets a credit rating of 9 (1 being the best; 9, the worst) and it stays on file for 6 years. Therefore, accessing credit during this time will be extremely difficult and/or extremely costly. It’s not free: One has to hire a bankruptcy trustee who charges a fee. Depending on one’s income and assets, it can be quite expensive to go bankrupt. Not all debts can be included: According to the Office of the Superintendent of Bankruptcy Canada, even after one files for bankruptcy and has been discharged, some legal obligations will remain with the person as they are excluded from being discharged: • Alimony and child support payments • Student loans if it has been less than 7 years since one was a full- or part-time student • A fine or penalty imposed by the Court • Debt arising from fraud

Money Cent$ for Families bc council for families 53 Resources

some suggested books and magazines (Don’t buy books; borrow them from the library!) • The Complete Idiot’s Guide to Improving Your Credit Score • The Complete Idiot’s Guide to Getting Out of Debt • The Complete Idiot’s Guide to Personal Finance in Your 20’s, 30’s • The Complete Idiots Guide to Managing Your Money • Personal Finance for Canadians for Dummies • Managing Your Money All-in-One for Dummies • Personal Finance Workbook for Dummies • Credit Repair Kit for Dummies • Moneysense magazine

websites http://www.dummies.com/how-to/personal-finance/credit-debt.html www.brighterlife.ca www.gailvazoxlade.com www.mymoney.gov www.moneysense.ca http://www.fcac-acfc.gc.ca/eng/index-eng.asp http://practicalmoneyskills.ca/ http://www.ic.gc.ca/eic/site/ic1.nsf/eng/h_00071.html http://www.yourmoney.cba.ca/ www.smallchangeaddsup.ca http://www.ctvbc.ctv.ca/olsen/ http://www.alwayssavemoney.ca/ www.alwayssavemoney.ca

tv shows/you tube videos Credit http://www.cbc.ca/marketplace/2011/debtcollectordread/ ‘Til debt do us part Princess CBC Marketplace CTV Steele on your side

calculators http://www.ic.gc.ca/eic/site/ic1.nsf/eng/h_00071.html http://www.fcac-acfc.gc.ca/eng/resources/toolCalculator/index-eng.asp http://www.nomoredebts.org/learning_credit/calc.shtml

54 bc council for families Money Cent$ for Families {Consumerism} Consumerism

Money Cent$ for Families bc council for families 55

What’s your relationship with spending and shopping?

any of your individual and family clients are likely facing the same situation as other families whose dollar just doesn’t go far enough; they are spending more than what they earn. Chances are their M income is too low to cover all their needs. There is also a very good chance that they are affected by consumerism and don’t know how it is influencing their spending habits negatively.

Consumerism is the strong, uncontrollable desire to have more of what one already has. On a daily basis, we get bombarded with 3000 advertisements encouraging us to spend. The problem is aggravated by peer pressure, which leads us to spend money in order to fit in. And thus, starts the cycle of consumerism, of excessive and thoughtless spending. “Wants” become “needs” and pretty soon, there is no differentiation between the two.

The moment something new comes out, we want to buy it even if we have to camp outside the store, in the cold and rain overnight. Yesterday’s item is replaced with today’s, and today’s with tomorrow’s new gadget. That’s consumerism.

While the immediate impact of consumerism may be happiness, the end result is sadness and stress... Money issues are the #1 reason why couples split. Understanding consumerism will help with taking control of current money issues and making smart decisions in the future. Empower your clients with knowledge of how consumerism can impact their short- and long-term money situation.

Consumerism is hard to detect, especially for the person involved. Consumerism is most likely the issue if one makes statements like: • I get excited at the prospect of shopping • Whenever I go out, I end up buying something even if that was not my intention • When I see something, I want it right away • When I see a good deal, I buy it even if I don’t need the item • I am going to live once so I might as well enjoy life and buy what I want • I bought XXX two years ago but haven’t had a chance to use it • I hide information from my family on how much I spend on “stuff” • Everything I buy is a “need.” I hardly spend money on “wants.” • I have to have whatever new gadget or style comes out in the market Consumerism • My friends bought it so I had to buy it too

Money Cent$ for Families bc council for families 57 Need or want?

Knowing the difference between needs and wants is critical to overcoming consumerism. Refer to the Needs and Wants section under Budgeting.

Clever advertising promotes consumerism and impulse shopping

When a consumer spends money, the business wins. Help clients understand how impulse shopping, which is an emotional response, affects financial health. Feel bored or want to celebrate or want what a friend has? We go shopping. Consumerism is prevalent because advertisers know what will make consumers spend. Think about where chocolates are placed in a grocery store…near the cashier so while bored and waiting, the consumer can munch on one.

The euphoria from impulse shopping dissipates rather quickly leaving one feeling hollow, stressed out, unhappy, etc. Help clients get to the core of the problem - their emotions - to gain control over spending whether impulsive or non- impulsive.

Advertisements inform. They create desires. Think about the words advertisers use in their commercials. Think about the messaging - images, words and music -they use to attract the consumers, both subtle and non-subtle. For instance, a sports drink ad shows a young, toned body playing on the beach. How many sports drink consumers actually have a body like that or spend time at the beach?

Think about product placement. Imagine the layout of a grocery store. What is found near the front? Non-essentials, like flowers, snacks, etc. Necessities, like, dairy, bread, etc. are further away from the entrance. Children’s toys are kept at their eye level. Businesses know that a consumer will walk the distance to buy essentials but the likelihood of walking a few extra steps to purchase non-essentials is quite slim. So it is placed prominently in the front to tempt the consumer. Consumerism

58 bc council for families Money Cent$ for Families Worksheet: I Am In Control Of My Finances The power of product placement in stores

Write down items purchased on impulse last week. • Were they displayed prominently at the front of the store? • What was so attractive about the item that money was spent on it?

Item Location in the store

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Businesses use endorsements to influence and it is done so subtly that a consumer does not even realize they have been influenced.

endorsement works NBC TV’s show Will and Grace, showed a character wearing a pink Polo shirt that was followed by a 10-second clip telling viewers how to purchase one. The site sold $3,000 worth of shirts over the next five days! Source: http://www.media-awareness.ca/english/parents/marketing/advertising_everywhere.cfm

Consumerism

Money Cent$ for Families bc council for families 59 Worksheet: I Am In Control Of My Finances The Emotional Aspect of Spending

Emotion can often trigger us to spend money, being aware of what triggers us to spend can help us control our spending. Pick 5 examples of times when you have spent money and answer the following questions. Ask your self when do I spend money? Why? Was it because I was sad, lonely or with friends? Think about how you feel after money is spent Sad? Happy? Stressed?

When was money spent? Why was it spent? How did it feel after?

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5 Consumerism

60 bc council for families Money Cent$ for Families Steps to overcoming consumerism

Once your clients understand consumerism and how it impacts their lives, offer them tips on how to get control over it. Start with the “My list of things I can’t live without.” This will put into perspective what is truly important in life and what possessions are needs and what are wants. Though a very difficult exercise which will evoke strong emotions, it is very important they do it to get a good grasp of what is consumerism and how it impacts their lives. Support your client through this process. Share with them tips to reduce the influence of consumerism on them. Consumerism

Money Cent$ for Families bc council for families 61 Worksheet: I Am In Control Of My Finances My List of Things I Can’t Live Without

If there was a disaster and you can carry only 15 items with you, what would those be? Write them below in column 1. Next, in column 2, write down 15 more items you would take if you had the opportunity. Write in column 3 the next 15 items.

Can’t live without these My prized possessions Nice to have

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Think about what is not on this list. There are items that are dispensable. They are wants. Try to get Consumerism rid of as many of these as possible to simplify life.

62 bc council for families Money Cent$ for Families Below are some tips for becoming more aware. The more educated one is as a consumer, the less likely s/he is to be influenced by advertising.

• Stop, think and listen. Walk away from the item and take a few minutes to ponder the decision. Better still, sleep on it. If it is important, you can always go back the next day to buy it. Chances are, you won’t! • One in, one out rule. Truthfulness is at the core of the success of this rule. For every item one buys, give away one item of similar value or importance to charity. A bonus benefit is that it ensures that one doesn’t become a hoarder. • Need or want? For every purchase, ask this question. Be honest with oneself. • Avoid rebates as they act as a hook and earn substantial amounts of profits for the business because most consumers don’t bother to mail them in. Businesses count on lazy consumers hence there are more rebate offers than ever before. • Bait and switch method. A good example is Boxing Day sale. Stores advertise massive discounts but only offer a very small quantity of that item. This is store’s way of luring a customer in. A customer who has gone in with expectations will most likely not come out without buying something. Simply put, the store met it’s objective: make the customer spend money in store! • Think of how many things that are in the market today that didn’t exist or were uncommon merely 25 years ago? Cell phone, Internet, iPad, iPod, designer labels, etc. are all good examples. Many of these are incorrectly considered “needs” today. Are all these truly essential to our survival? • Buy one, get second at 50% off. So, instead of buying one item, the consumer will be tempted to buy two to qualify for the discount. This is great for business! • Discard old, buy new. Styles change at such a fast pace today that to keep up, one would need to have an endless supply of cash. In a few months, the incoming model or style with minor changes makes the previous one outdated.

Clever advertising and marketing have reshaped values. It is time for consumers to reconsider their values, take charge and start making smarter choices.

Consumerism

Money Cent$ for Families bc council for families 63 Targeting the young ones

Kids are a very lucrative market. Children between the ages of 8 – 12 spend $30 billion of their own money each year and influence another $150 billion of their parents’ spending. In 2010, young people spent over seven-and-a-half hours with media each day, which equals to a shocking 52.5 hours a week!

Buy Nothing Day • Challenge children’s definition of “cool.” Can the toy really do stunts as shown on TV? It is observed the Friday after • Encourage kids to challenge advertisers’ claims about their products. Do a blind taste tests at home US Thanksgiving in North or buy a product and compare its performance with the claims made in the commercial. America and the following day (Saturday) internationally, Buy • Talk about the effects of consumption on the planet, and how the world’s resources are distributed Nothing Day is a protest against unevenly amongst people. consumerism. On this day, • Make gifts whenever possible rather than buying them. followers vow to buy nothing. • Donate money, goods or time to good causes. For more information, visit http://buynothingday.org/ • Celebrate Buy Nothing Day at home. • Explain that shopping is not a hobby or pastime. It’s something one does when one needs to buy something. Consumerism

64 bc council for families Money Cent$ for Families Resources websites http://www.globalissues.org/issue/235/consumption-and-consumerism http://www.globalissues.org/article/238/effects-of-consumerism http://www.thecorporation.com/ http://www.pbs.org/parents/childrenandmedia/ads-grade.html http://pbskids.org/dontbuyit/advertisingtricks/ http://www.media-awareness.ca/english/index.cfm www.adbusters.org www.buynothingday.org www.alwayssavemoney.ca tv shows CBC Marketplace CTV On Your Side books (Don’t buy books; borrow them from the library!) No Logo by Naomi Klein Consumerism

Money Cent$ for Families bc council for families 65 Council for Families

Making Cent$ for Families An Introductory Guide to Money Issues for Professionals Working with Families

Written by Khadijah Suleman Designed by Tina Albrecht

Published by BC Council for Families 208 – 1600 West 6th Avenue Vancouver, BC V6J 1R3 www.bccf.ca

Funding for the development of this publication was provided by TD Financial Literacy Grant Fund - SEDI

Printed in Canada