Maybe now more than ever, it’s important to be armed with the ability to make good financial decisions. While the education might seem daunting to some, there are some painless resources in the community that can help.
Free financial literacy
One such example is a free financial literacy program offered through Access Credit Union (ACU).
“[The] program launched in 2017. We partner with Each One Teach One for this program. It's a fantastic organization,” says Riley Klassen, a business account manager at ACU. “We're able to offer 16 different financial literacy workshops. The goal of this program is to empower people to make good financial decisions for themselves and their families without selling our products and services.”
The program's only purpose is to educate community members in its mission of promoting a healthy financial life for everyone. Topics include loans, filing taxes, identity theft, fraud protection, and more. Workshops can be booked through the Access Credit Union website.
Broaching an uncomfortable topic
While most people understand that building financial literacy is valuable, there are also some barriers to it. Klassen acknowledges that finances are a delicate matter — while it’s an important area that each person must manage in life, it is also something about which not everyone receives education, and in some cases, one’s current financial situation is a source of insecurity.
The combination can cause discomfort that results in shying away from the topic. For Klassen, this makes it even more important to lean in.
The financial workshops through ACU inform and teach in a friendly and welcoming environment of experts who understand common barriers.
“How we manage our finances affects ourselves and sometimes others in a lot of ways,” says Klassen. “It can be a little embarrassing sometimes, so . . . I'm excited for the opportunity to be able to share about financial literacy in our communities.”
Should I get a loan?
One of the topics through Each One Teach One is information about loans, a concept that can be made less intimidating with knowledge. The first question to address is if it makes good sense to apply for one.
“It can go both ways. Sometimes getting a loan is a good idea, sometimes getting a loan maybe isn't a great idea and there's a better way to go about making a purchase,” says Klassen. “There are some examples of borrowing wisely, but this is somewhat subjective. Everybody's situation is a little bit unique, but in general, making an investment is typically a wise time to borrow money.”
What counts as an investment? According to Klassen, it could be buying a house (either to live in or a rental), buying a vehicle or equipment to help one’s business grow, or purchasing an RSP to invest money.
Another good reason to take out a loan could be to reduce interest payments.
“Maybe you've got credit cards with high interest, [and] you've got a large balance on your credit cards, and you just can't pay them off — talk to somebody,” he says. “Maybe we can look at a consolidation loan and put those credit cards into a loan where you're making regular payments on them at a lower interest rate.”
In contrast, Klassen offers a situation in which it might be best to avoid borrowing.
“Sometimes life is hard. Sometimes we're in a tough spot, and there are maybe no other options, but if you're constantly going to your financial institution [for a loan] because you can't keep up with your bills, . . . maybe a loan will help you out for a little while, but in the long term, [consider sitting] down with somebody to do some budgeting.”
Small steps in the right direction
For those who consider a loan the right option for them, there are a few things to think about when it comes to increasing the likelihood of receiving one.
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“The first thing is we look at your total income and the total payments to make sure that you can afford the loan. We also look at your credit history,” says Klassen, adding that the financial institution will take note of payment history, how much credit one has used, as well as income tax.
“Maybe some people don't realize that . . . we want to make sure that you're filing your income taxes and that any taxes that you owe are paid,” he says. “It's a pretty important thing, so make sure you're filing your taxes.”
Klassen says while some people do not qualify for the requested loan based on the information above, it doesn’t necessarily end there.
“In my role, I don't like to just say no. I like to say that maybe it doesn't work this way, but maybe there's another way we can make it work,” he says.
The process itself
As for beginning the loan conversation, it starts with a friendly conversation with one’s financial institution.
“If you have somebody that you deal with, you can contact them directly, if not, just attend the branch that you bank at or call in to your local branch,” says Klassen. “The initial conversation is . . . gathering information, learning about you and your financial goals, and also your request for the loan. Sometimes you'll be asked to bring in certain documents, other times we determine what's needed during that initial meeting.”
Demystifying the mortgage
Of course, borrowing tends to happen with home ownership. There are also a few important things to consider both during this important time of life and before it.
"I guess the big thing with mortgages is . . . a down payment. That's a scary thing for some people, especially new home buyers, but for somebody that's buying a house, you can get away with as little as a 5% down payment, so that does help a lot of people that maybe don't have a lot of savings [as they] get ready to buy their first house.”
Klassen says that if the down payment is less than 20%, it is labelled a “high ratio mortgage.”
“There are some premiums associated with that, but a lot of people take advantage of that program,” he says. “It's a great program for people to get into a home.”
As one plans to purchase a house, Klassen also recommends keeping track of the associated fees.
“When you buy a house, you're going to deal with a lawyer, so there's going to be some legal fees. Land transfer tax is also a big one. Make sure you're talking to your lawyer or even your financial advisor . . . about some of these costs,” says Klassen. “Some people also don't realize that when you buy a home, you don't pay the realtor fees . . . . Those fees are on the seller.”
Protecting yourself
Regardless of which route one takes with loans, insurance is something else to be mindful of.
“Insurance is really important, especially when we're taking on new debt. We want to make sure that we're covered if anything happens to us,” says Klassen. “People often think of life insurance when they think of insurance, but there's also disability insurance, [and] loss of employment insurance.”
Klassen says it’s essential to think about insurance early.
“You want to make sure you're covered for those things,” he says. “So think ahead and don't start the discussion or application process when you're really in trouble. Get started and talk to somebody so you can plan and prepare for your goals.”
With some education and forethought, loans don’t have to be as intimidating as they initially appear. To pair this information with a lesson on budgeting, another important topic during Financial Literacy month, see Pembina Valley Online’s conversation with Twyla Giesbrecht.
With files from Ty Hildebrand