B10
n RETIREMENT LIVING
n THE BRANDON SUN
THURSDAY, FEBRUARY 12, 2026
Old-school financial advice that no longer fits Buying a starter home, living on one income and staying in the same job for 40 years — life was very different for older generations and many young people have real- ized what worked for their parents doesn’t necessarily work in today’s modern world. BY CATHY MIYAGI
As younger Canadians continue to face high housing costs, slowing wage growth and other challenges, age-old financial adages have be- come outdated, forcing a rethink of what smart money management looks like today. Here are some common rules of thumb for money management that financial advisers say need re-exam- ining. HOUSING SHOULD ONLY TAKE UP A THIRD OF YOUR BUDGET “If you’re trying to stick to this rule, you can only afford to buy a home that’s $500,000, which is well below the average across the country, and it doesn’t go very far in most major cities,” said Jason Nicola, certified fi- nancial planner at Vancouver-based Nicola Wealth. He cites research that shows just how much things have changed from previous generations. The home price-to-income ratio has steadily grown over the past sev- eral decades. Data shows that in the early 1980s, the home price-to-income ratio was about two to three. Now, the ratio sits closer to six or seven. The home affordability challenge remains even after accounting for today’s lower interest rates. With mortgage rates of about 4.5 per cent today, a young couple with $100,000 in gross income would have to spend at least 45 per cent of their af- ter-tax income just to cover monthly mortgage payments, let alone pay for property taxes, insurance, and maintenance, said Nicola. Though he doesn’t recommend it, he said it’s not uncommon to see some households spend up to 50 per cent of their monthly income on housing costs. “I think it’s just the uncomfortable reality for a lot of people,” he said. SAVINGS WILL GROW WITH COMPOUND INTEREST Setting cash aside in a savings ac- count may have benefited signifi-
A person uses the calculator app on their phone. (The Canadian Press files)
cent rule has been talked about for decades (but) it does vary by person and their desired lifestyle.” Instead, he suggests young Cana- dians invest in themselves and their future earnings. “RESPs used to be a bit more restricted in terms of what you can use it for, but that has start- ed to really open up,” he said. This advice comes as career paths for young Canadians look very dif- ferent than they did for previous generations. “Loyalty with the company used to be rewarded, but today, adaptability in your career more often is,” said Mackie, adding that younger work- ers now average four years at each job. “It makes sense for people to move around in their careers, get higher pay, broaden their skills and be able to have a better work-life balance.”
Nicola agreed that there is still power in the compounding of re- turns over time, even though inter- est rates are lower now. That’s why he discourages keeping a three- to six-month emergency fund in a tra- ditional savings account. “Sure, it’s a great idea and it’s a really nice thing to have that gives you comfort. I just don’t think it’s a hard and fast rule,” he said. “(Very few) of my clients are going to have six months of spending just sitting in cash not earning any interest.” START SAVING EARLY FOR RETIREMENT While previous generations fo- cused on paying down debt as quickly as possible and saving what remained, this approach may be unnecessary for young Canadians today. “People early in their careers are often in lower tax brackets, so an
RRSP might not make much sense,” said Ainsley Mackie, portfolio man- ager with Verecan Capital Manage- ment. “Not all debt is bad debt. It doesn’t have to be rushed to pay it off,” she said. In fact, Mackie advised that having some debt and making regular pay- ments will help build credit, a “super important goal” if you’re going to ap- ply for a mortgage later. She cautions against high-inter- est loans for recreational items like ATVs and snowmobiles — common “toys” in her town of Nelson, B.C., where rates on such loans can hover around 21 per cent. Lopez-Gil thinks the current wide- spread perception of how much we need in retirement is overly empha- sized. “I don’t think there’s a univer- sal withdrawal rate that everybody could use,” he said. “The four per
cantly from compound interest in the ’80s when rates ranged between 10 and 15 per cent. But with “high-in- terest” savings accounts currently typically offering rates of two to four per cent, experts say money should be invested rather than left sitting as cash. “Perhaps interest rates, the amount that you could receive has changed, but the power of com- pounding has not changed,” said Aldo Lopez-Gil, a financial adviser at Edward Jones based in Toronto. He explains that given lower in- terest rates today, compounding growth is best seen in other savings vehicles like the tax-free savings ac- count or first home savings account. “I think there’s a gap in terms of education and understanding as to what investments can be put into a TFSA,” said Lopez-Gil. “In my expe- rience, it’s a completely underuti- lized account by Canadians.”
» The Canadian Press
OPEN HOUSE
FRIDAY February 1 PM - 3 PM
27
Explore our beautiful retirement community, tour our spacious suites and meet our friendly staff & residents. Enjoy light refreshments, and learn why Rotary Villas is Brandon’s premier choice for senior living.
Health Checks – There’s a Whole Lot of Living Left To Do! Save the Date: September 15, 2026 for our next in-person event
Visit www.brandonmbhealthchecks.ca for informational videos, access to virtual screens, educational resources, and organizations in Brandon and area as well as across our province that could be beneficial to everyone. Check www.facebook.com/HealthChecks- Brandon to see our monthly virtual presen- tations. These presentations are one hour in length an a variety of topics related to your health and well being. A big thank you to our Steering Committee, Vendors, Speakers, Screeners, Consultants,
Prairie Mountain Health, Professionals, Volunteers, Students and Researchers from the Learning Centre, BU, ACC and U of M, and Attendees for the past 7 years. A special Thank you to our Sponsors: WCGtv, and Conversations on Aging, The City of Brandon, Brandon Regional Health Centre Foundation, Manitoba Association of Senior Communities/Age Friendly Manitoba Resource Team and the Government of Canada New Horizons Seniors Program for helping to ensure that this event happens every year.
Come & Go. Join us at our West Entrance - Off of Queens Ave. & Crocus Gardens Rd.
Please contact us at healthchecksbrandon@gmail.com
1340 - 10th Street, Brandon 204-725-1340 www.rotaryvillas.ca
Powered by FlippingBook