A Sandwich Generation

A lot has changed in our family cultures of the past 100 years.  In 1900, the life expectancy of an average person was around 50 years old, while today it is closer 80 years old.  In 1900, it was very common to have 3, even 4 generations living in a home.  Today, while it is more common for the younger generation to stay with parents until their late 20’s, the expectation is that they will leave, and over the past 50 years it has been pretty rare for people in their 50’s to have their parents living with them.  This is changing for many Canadians.


Canadian Baby Boomers are facing something that many have never really prepared for: the caring of their aging parents.  As Baby Boomers hit their 50’s and 60's and their children start leaving home, they are finding that some of their parents are in their 70’s or 80’s and are having difficulty living on their own.  Baby Boomers are starting to take in their parents, sometimes for health or financial reasons.  The health reasons tend to be obvious reasons for care, whether mental or physical, but the financial reasons are not always discussed.

Finances in Your 30's - More Debt, Some Savings

While your 20’s are often about accumulating debt and having little to no income, your 30’s also tend to be about accumulating debt, but this time there is an income.

People in their 30’s usually are trying to move out of the tight financial circumstances of their 20’s.  This mean they are paying off the debt they built up in student loans and credit cards, and trying to purchase better quality times that will last longer (car, furniture).  It’s these last things that can make life the most difficult for people in this age group.

When buying a home or vehicle, most people think of the size and age they want rather than the cost.  They often think of the home their parents have and want something about the same size or even bigger.  What many 30 year olds forget is that their parents didn’t get that larger home until they were in their late 40’s or early 50’s.  They worked for 20 years, often at long career jobs before being able to purchase that larger home.  People in their 30’s are trying to buy that same level of house with only 5 to 10 years of work behind them.  This makes the monthly payments so tough that very little is left for anything else, and they better hope that no emergency comes up.

Tax Free Savings Account

The Tax-Free Savings Account (TFSA) is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs. The TFSA complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) and the Registered Education Savings Plans (RESP).

How the Tax-Free Savings Account Works

• A limit of one TFSA per person. Similar to RRSPs, this account is reported to the Canada Revenue Agency.
• Contributions to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, earned in a TFSA will not be taxed, even when withdrawn.
• Unused TFSA contribution room can be carried forward to future years.
• You can withdraw funds from the TFSA at any time for any purpose.
• The amount withdrawn can be put back in the TFSA at a later date (not within the same calendar year) without reducing your contribution room.
• Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits.
• Contributions to a spouse’s TFSA will be allowed and TFSA assets can be transferred to a spouse upon death.

Finances in your 20’s – or The Age Of Debt

Your 20’s are an exciting time.  You are determining your career, possibly even changing career paths a couple of times.  You usually finish your concentrated formal education (university, college) during this time period, and most of you have gone into debt to pay for your education.  You purchase your first vehicle with a bank loan, usually around $4,000 to $5,000, and you wonder how you can make the payments.  For many, they are wondering about starting a family and if it’s time to invest in a house and avoid paying rent.


The 20’s is a time of accumulating debt.  There is nothing wrong with that.  It is normal.  However, you want to make sure that the debt makes sense and its accumulation is controlled.


Education debt – It is normal for students to leave a 4 year degree with over $30,000 in debt.  That is a lot of debt when you don’t have a career job to help pay it off.  At $30,000 over 7 to 9 years, that means you will be paying over $500/month to student debt.  If that debt is built by going through a program that will give you a good living, it may be worth it.  However, if that debt paid for ski trips or a program that only offers $20,000/year in job salaries, you will have a very heavy burden for a long time.  While education debt may be necessary, try to keep it down.  You will appreciate it when your friends are still paying it off at 34 years old and you are free and clear.

Budgeting basics

I’m sure everyone has heard the following basics of building financial security, but because they are the basics they are worth reviewing:

1.Spend less than you earn.
a.This can be a huge topic unto itself.  Canadians have been spending more and more of their income over the past 15 years, to a point where many are spending more than they take home.  In order to do this they are going deeper into debt.

b.What are they spending money on?

• The biggest house and mortgage they can afford, even when they don’t need one that big (5 bedroom house with only 1 or 2 kids).  Unfortunately this often also comes with more property taxes and high heating and electricity bills, making it cost even more.  These costs often make it difficult to cover other expenses.
• Brand new vehicles, bigger and with all the extras that jack up the price by 30 to 50%.  These large vehicles (SUVs, 4 by 4’s that never see gravel…) also mean higher insurance rates and often poor fuel mileage.
• Eating out or eating prepared foods.  I know most people are very busy, making it difficult to make meals at home, but when eating out costs at a minimum of $8 and easily up to $25 per visit it may be time to review both eating and spending habits.  This is a very expensive consumer habit that can change your monthly spending by $200 to $500 per month.
• The latest toys.  People are going into debt to have the newest TV or sound system, video games, newer washing machine…  Often people are buying new versions of these even when the old one still works just fine (replacing at 27” TV with a 47”).
•  Holidays.  I can’t believe how many people take at least one vacation to Mexico, Cuba, or Las Vegas every year, and put the whole thing on their credit card.  They believe they deserve the break, because they are working so hard.  The thing is they have to work so hard to pay for last year’s vacation.  When someone is having difficulty making mortgage payments, a $1,500 trip to Las Vegas probably isn’t the best thing to do.

Credit Scores & Reports

A credit score is a pretty important thing.  It will determine if you can borrow to buy a vehicle or home, and will influence the amount of interest you will pay on that loan.  To the lending institution, the credit bureau (or report) tells them if you are financially responsible, if you make your payments on time, and if you are a good risk or a poor risk for a loan. The credit score ranges from 300 to 900, with 900 being perfect.  720 is considered good, while scores below that usually require more collateral and can pay higher rates.  Most financial institutions will not lend at all when a score is below 620.

Credit reports from any of the major reporting companies show a history of your credit use over as much as a ten year period. A report begins with identifying information, including your name and social security number, current and former addresses. Next is a list of creditors and your payment history with them, and ratings of your credit use.

Look carefully at each part of your report and note any errors. Incorrect demographic information can make it impossible for your own report to be found. This can cause real problems when you apply for a loan, an insurance policy, or in some cases a job.