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Financial Basics 101 - Part II

Welcome to part two of our two-part series on financial literacy. In part one, we discussed the beginning basics of building a stronger financial future — topics like spending and budgeting, managing credit cards and loans, and paying off debt.

In the second part, we’re going to be focusing on other important basics, including:

  • Ways to save
  • Setting and reaching financial goals
  • Protecting yourself from fraud 

The financial skills in these articles are based upon the Government of Canada’s Financial Toolkit, a 12-module program that teaches you, quizzes you, and overall helps you get a leg up in your own money management.


Ways to Save

If you’re among the many Canadians who have little-to-no emergency savings, you’re certainly not alone. In fact, a recent study found that almost half of Canadians have no emergency funds set aside. Another 53% are living paycheque to paycheque. So, if you happen to fall into either one of those categories, knowing where to start can feel very overwhelming.

Start Small, Start Simple
Even if you don’t have a lot of money to begin with, starting somewhere will help build a foundation upon which you can grow your savings. Here are a few simple steps you can take right away to get started:
  1. Set up automatic transfers from your chequing account. Whether it’s $10 a month or $100, having this done automatically will ensure you’re setting money aside.
  2. Take a closer look at your monthly budget to see where you can minimize spending. Things like daily coffees, frequent meals out, and entertainment can add up quickly. Try cutting back in those areas and put the extra money in emergency savings or towards your debt.
  3. Determine your wants vs. needs. While it can be tempting to purchase things we want right now, it can hinder us from saving for things we need in the future. Making more careful decisions about daily, weekly, or monthly purchases can decrease your overspending and increase your savings.

Setting and Reaching Financial Goals

In addition to saving, part of building a strong financial future includes setting — and reaching — financial goals. Whether it’s larger goals like buying a new house or investing in a new car or smaller goals like going on that much-needed vacation, achieving personal benchmarks will further empower you to invest in yourself.

But where do you begin? Breaking down your goals into simple categories is a simple and great way to prioritize.

Short-Term Goals

These are items you can save for that you don’t have room for in your typical monthly budget or paycheque. Maybe you’ve been eyeing a new television or want to take the family on a vacation next year. Create a list of purchases you want to make in the short-term to enhance your motivation to save for them.

Mid-Term Goals
Mid-term items are purchases you may be planning on making in the next few years. A new vehicle, a home, graduate school — these are all purchases you want to be well-prepared for. Having a strong savings built up beforehand can significantly decrease the amount of debt you may need to take on in order to make some of these larger investments.

Long-Term Goals
Long-term goals are things you want to invest in now but may not need for years, even decades to come. They can include things like setting aside some of your income for retirement or saving for your children’s higher education.
One of the most important aspects of reaching your financial goals is staying on track. Once you have a clear vision of your goals, you can do that with helpful tools such as a Financial Goal Calculator to monitor your progress.


Protecting Yourself From Fraud

Identity thieves are always coming up with new and creative ways to steal your information. In fact, nearly 1 in 3 Canadians have been victimized by scammers, with a majority of them losing up to $5,000. Whether it’s through email, the phone, or even false charities, it’s quite easy for fraudsters to pose as a legitimate person or company — or go unnoticed completely.

There are several different types of scams and fraud, with some of the most common including:

  • Mass marketing fraud: This usually includes phishing and telemarketing scams through the phone, mail, online, or email where scammers try to solicit your personal information.
  • Investment fraud: Some of the most common types of investment fraud include pyramid schemes and Ponzi schemes, in which someone asks you to invest a lot of money upfront and promises a big return later.
  • Payment scams: Scammers will ask you to accept a payment into your bank account, take it out in cash, then send it their way — typically offering a commission for you. However, those initial funds are likely not even there, leaving you out of a large sum of money.
  • Credit and debit card fraud: This happens when fraudsters get ahold of your card information and/or personal identification number (PIN) electronically, then use the card as their own.
  • Other types of fraud: These can include lottery scams, charity fraud, real estate fraud, and consumer fraud.

 

Know the Warning Signs

With all the different types of fraud and scams out there, it can feel overwhelming knowing how to protect yourself. The good news is, there are typically several warning signs and red flags you can spot in order to keep you and your personal information safe.

For Phishing or Phone Scams
Some of the most common red flags in phishing or phone scams include:
  • Any ask for personal information, like your PIN or password. Companies typically don’t ask for this via email or over the phone.
  • Links to a website that isn’t secure. This can be spotted in the URL by checking to see if the web address begins with https vs. http. The ‘s’ means the site is secure.
  • The email address or website isn’t the exact same as your financial institution.
  • Spelling or grammar errors.
  • Any request over the phone to give any personal information, such as your account number or date of birth.

For Other Scams

There are several warning signs of all types of other scams, including:

  • A ‘too-good-to-be-true’ offer.
  • Pressure and urgency to invest in something without detailed information.
  • Being asked to give personal information such as account numbers, passwords, social security number, mother’s maiden name, etc.
  • Being made to feel guilty when you refuse to participate.

When in Doubt
Never give out any personal information if you doubt the company is real or don’t know their true intentions. If you believe you’re being contacted by your financial institution or a legitimate company, hang up or stop corresponding and reach out to them yourself. Find the company’s verified contact information and get in touch to confirm whether they were the ones asking for your information.

If you’re still unsure about knowing how to spot a scam, use this helpful quiz to test your knowledge and study real-life examples.

 

Back to Basics

While there is seemingly endless information out there when it comes to financials, starting with the basics is a great approach to taking control of your financial future. Consistently educating yourself and making smart decisions along the way is one of the best ways to create security and stability.

In addition to this article, you can also always turn to Part I in our Financial Basics series as well as other articles featured on the 310-LOAN blog. We’re always working to help you invest in yourself and secure a strong financial future.

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