a) accounting b) investing c) markets d) taxation e) all of the above
3. More Difficult:
If you put money into a savings account, your money will grow.
a) True b) False
4. More Difficult:
On average, taxes in Canada are
a) 10% of your income b) 15% of your income c) 25% of your income
If you want to be rich, you need to build
a) assets b) liabilities
Rich people do not pay a lot of taxes because they own corporations.
a) True b) False
Check your answers below.
Financial Literacy in Canada
New immigrants to Canada have a unique opportunity to start their life anew and to give a better life to their children. However, the happy stable life many dream about often turns out to be be a life-long financial trap with many concerns typical of majority of Canadians: living paycheque to paycheque, worrying about losing a job and not being able to pay the bills, as well as feeling dissatisfied yet unable to leave their current position. Too many first generation immigrants eventually give up on themselves thinking: “My life is not important. I’m doing this for my kids. If not my life, at least their life will be better.”
But will it be?
The problem is that most schools in Canada do not teach children one very important subject: Financial Literacy. So it is up to the parents to educate their children about money. As a parent, you have the power and the responsibility to make sure your children do not end up in a typical Canadian trap of ‘I-hate-my-job-but-I-can’t-quit-because-I-have-bills-to-pay.”
Here are some things to learn about money in Canada:
Times have changed
In the past (1970s), you could get a good education, get hired because of your good education, get a promotion or several and save for your retirement. In the past, savings accounts earned double-digit interests and these accounts could actually grow your wealth. Those days are gone. Today, banks are charging people to hold their money and we are faced with the reality of negative interest rates.
In today’s Canada, millennials (new generation) are discovering that college or university education no longer guarantees a job. There is 27% unemployment/underemployment among recent graduates. And many of these young adults are already in debt because they took out a student loan. According to Statistics Canada, the average Canadian university graduate finishes school with more than $26,000 in student debt.
Taxes in Canada
Once you and your kids find a job in Canada, you will soon discover what percentage goes to taxes. Depending on your province, it could be 25-30% of what you are earning (15% federal tax + provincial tax). If you know a little bit of history of taxes, the whole concept started originally as ‘we take from the rich and we give it to the poor’. However, as the governments needed more money, they started collecting taxes not just from the rich but also from the middle class and even from the poor. This would be fair if the rich, who are financially very well educated, didn’t figure out a way how NOT TO PAY so much taxes. And they did it through corporations.
Who are you working for?
Middle class employees don’t work for themselves. They are:
Working for the company – which makes the owner rich.
Working for the government – the taxes will be taken off your paycheque before you even see the money, and the more you earn, the more will get taken.
Working for the bank – after taxes, your next largest expense is usually mortgage and credit card debt.
Typical middle-class people experience in Canada
get good grades at school
graduate from a college or university
realize they don’t have experience
work below their skill level to get experience
find a better job
work to build their career and pay off student debt
work to pay for their car
work to pay off their mortgage (25-30 years)
The difference between rich, middle class and poor
Poor people have expenses.
Middle class people have liabilities (car, house)
Rich people have assets (real estate they rent out, businesses they own, stocks, bonds, royalties from intellectual properties)
Financial literacy: basics and beyond
Having a basic knowledge of accounting, investing, markets and the taxation law is what constitutes financial literacy. The ability to read numbers is a vital skill when it comes to building a solid financial foundation. Investing is the science of ‘money making money’. Understanding markets is understanding supply and demand. The person who understands the advantages of protecting their wealth through a corporation can get rich much faster than an employee or a small business owner. Corporations can do what employees cannot: they can pay expenses before paying taxes! Rich people know how to protect their money while poor and middle class people don’t.
Education and Wealth do not always go Hand in Hand
Mark Zuckerberg, Bill Gates, Sean Parker, Dustin Moscovitz, Phil Ruffin and John Paul DeJoria are billionaires who only have a high school diploma.
Teach your Children about Building Assets
There is nothing wrong about getting a college or university education as there is nothing wrong with working for a company. But while doing this, any young person who wants to become wealthy needs to build ASSETS. If your job is your only source of income, you will always live in fear of losing it. If you have assets as your (additional) source of income, you will have a peace of mind. And isn’t this the reason you came to Canada?