According to a CIBC’s Financial Literacy and Preparedness Report, 60% of Canadians expressed a desire to boost their financial knowledge. During the holidays, it’s the perfect time to spark conversations and empower those around you to take meaningful steps toward lasting financial independence.
Here are a few ways to encourage your loved ones to take charge of their financial future:
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Introduce loved ones to the basics of investing
Investing can seem intimidating, especially for beginners. Start by discussing their dreams and plans for the coming year. Whether it’s saving to buy a home, pursuing personal passions, or maybe even planning for retirement, these conversations can lead to investing for the future.
Part of that discussion could be the importance of risk tolerance. Encourage them to assess their comfort with market ups and downs by learning through the ASC’s various resources and tools, including a CheckFirst risk tolerance quiz. This quiz provides insights that can help someone select investments that align with their personal financial preferences and goals.
Help friends and family see the value in tools like goal-tracking apps or financial planners to help keep them on track. These can help them stay accountable, monitor progress, and adjust plans as needed, making the journey toward achieving their goals both manageable and motivating.
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Give the gift of compound interest
Explain the concept of compound interest, which allows investments to grow exponentially over time. Interest is calculated on the initial principal and the previously accumulated interest. Showing examples of how small contributions today can lead to significant growth in the future can make investing feel achievable and exciting.
Introduce them to CheckFirst’s compound interest calculator, an excellent tool for everyone to understand where they are and what they need to do to build a financially successful future. The website also offers free tools, articles, and in-person and virtual programming to build and strengthen investment literacy throughout the year.
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Start a conversation about future goals
With the new year just around the corner, the holiday season is also a great opportunity to reflect on the past year and plan for the future. Talk with your loved ones about their specific financial goals. Identifying whether their goals are short-term or long-term is an essential step, as this determines the type of investment accounts, funds, and strategies they’ll need.
For short-term objectives, like saving for a house, options such as a First Home Savings Account (FHSA) or an RRSP Home Buyers' Plan are designed to help achieve this efficiently.
On the other hand, long-term goals like retirement savings may benefit from accounts such as a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP). Here, investments with the potential for higher returns, such as exchange-traded funds (ETFs), mutual funds, or stocks, could offer more growth over time.
Investing in the financial literacy of your loved ones can help them take control of their finances and start achieving their dreams. But, if you’re unsure about providing advice, you can also consider gifting a small contribution to a registered investment account like a TFSA or RESP. It’s a thoughtful and practical way to help loved ones take their first step toward their financial goals.
