Some households are saving money while isolating at home. What should they do with it?
Updated: 6 hours ago
Original article by:
Anna Sharratt
THE GLOBE AND MAIL
April 13, 2020
📰 Read the FULL ARTICLE here.
I spoke with The Globe and Mail about what households that have saved money while isolating at home should do with it. Here are the highlights and my contributions.
Key Takeaways
As COVID-19 disrupted work across Canada, an Angus Reid survey found 44 per cent of Canadians said they or someone in their household had lost work.
Households that are still working are unexpectedly saving money as commuting, dining out, kids' activities and travel come to a stop.
Financial planners agree that building up an emergency fund should be the first priority for those savings.
Paying down high-interest debt, especially credit cards, offers an immediate and guaranteed return.
Investing while markets are down can be tempting, but job security should guide that decision, and holding cash may be the safer choice for some.
My Perspective
The usual advice is to keep three months of living expenses in an emergency fund, but a global crisis calls for a bigger cushion.
"A global crisis like this isn't going to resolve itself quickly, and so I would recommend aiming to build up at least a minimum of six months' worth of household expenses."
I suggest keeping those funds in a high-interest savings account, so the money can still grow without any risk of losses. For people with stable jobs, plenty of savings, no debt and an appetite for risk, the market downturn has also created steep discounts on stocks.
"The rebound potential is huge once the economy begins to stabilize again."
Sheltering that growth in a TFSA can reduce your tax bill down the road. TFSAs can be great homes for money with a medium-term (three to nine years) or long-term (10-plus years) timeline, because recovery takes time.
"We need to give the market time to correct itself, which won't happen overnight."
Originally published in The Globe and Mail by Anna Sharratt on April 13, 2020. Use the link at the top of this post to read the full article.
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