Your personal finance to-do list for Week One of the trade war:
- File your 2024 tax return;
- prepare for the inflation reboot;
- suck it up and look at what’s happened to your investments;
- find the right house for your cash savings.
This is the start of a periodic series of trade war personal finance updates designed to provide ideas for defending your personal finances and investments. Let’s dig in:
File your taxes ASAP
The Canada Revenue Agency says the average tax refund for people who filed their 2024 tax return between Feb. 8 and Feb. 24 was $3,556. With a trade war threatening to undermine the country’s finances, why wait to get your hands on this amount of cash? The sooner you file your taxes, the quicker your refund arrives.
Young people just starting in the work force will have the easiest time doing this because they don’t have to wait for investment-related T-slips. They just need a T4 from their employer, plus any T5 slips for bank interest income and possibly a contribution receipt for a registered retirement savings plan.
Unfortunately, people with unregistered investment accounts holding mutual funds and exchange-traded funds may have to wait longer for their T3 slips this year. Investment companies say they need more time as a result of a delay in implementation of the federal government’s planned changes to capital gains tax.
Prepare for Inflation 2.0
This trade war arrives at a time when things were going nicely for the Canadian economy – growth was picking up, the job market was improving and inflation was back to its benign prepandemic self at levels just below 2 per cent. Tariffs will snuff growth, cause layoffs and rekindle inflation. That’s our own retaliatory tariffs in action – they make imports from the U.S. more expensive.
Prepare to offset an increase in living costs by finding one sizable expense to cut, or a few smaller ones. An ideal way to get started is to log into your credit card account and view your expenses for the past few months. Are there any streaming service or gift box subscriptions you can cut? Stay tuned for my rant on how hard it is to cancel some of these services.
Grit your teeth and scan your investments
You’ll be hearing a lot of advice about not looking at your investments because doing so could unnerve you to the point where you make rash and unnecessary decisions to sell perfectly good investments that are falling in price. But there’s an argument to be made for looking in the days ahead at how your portfolio is holding up.
Your losses are your losses – investing isn’t a one-way trip to the stars. You will be hammered now and then. What you’re instead looking for is evidence that the diversification you put in place is working. Watch for good numbers from your bond holdings, for your guaranteed investment certificates to provide their usual ballast and for cash-like investment products to earn interest at rates around 2.5 per cent with little or no risk.
If you’re well-diversified, you have things in your portfolio that are working for you right now. But seeing is believing. Take a peek.
Find the right high-interest savings account for your cash
Cash in savings is the best protection against economic uncertainty, but where do you keep it? Not in a big bank chequing or savings account – they don’t pay enough interest. Instead, find an alternative bank offering inflation-beating interest rates.
The PC Money Account was paying 3.5 per cent as of Tuesday, while many others offered between 2 and 3 per cent. Choose savings accounts that allow you to send e-transfers and make bill payments. If you need to use your cash because of a financial setback, you’ll appreciate being able to access it directly. No waiting for transfers into your usual chequing account.
Expect all banks and credit unions to offer deposit insurance. Banks taking deposits should be part of the federally backed Canada Deposit Insurance Corp., which protects eligible accounts to a maximum of $100,000 in combined principal and interest. This means you could, for example, have full $100,000 protection for each savings account or guaranteed investment certificate in your name, in a joint account and in a tax-free savings account as well. Credit unions have their own provincial deposit plans, some of which have higher or unlimited coverage.
Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.
