Alison Griffiths podcast
(We apologize for the quality of this recording.)

Hi, my name is Sheryl Smolkin. I’m a lawyer and a journalist. Today I’m pleased to be continuing the Saskatchewan Pension Plan’s series of interviews with financial experts. My guest is Alison Griffiths.

Today I am going to ask Alison to share with us the answers to some questions about retirement savings she has written about recently.

Alison is an award winning financial journalist, best-selling author and broadcaster. She has hosted two acclaimed television shows, Maxed Out for W Network and Dollars and Sense for Viva.

For many years she wrote a a popular financial column for the Toronto Star and her  weekly column for the Metro chain of papers “Alison on Money” continues. In addition to her frequent speaking engagements and workshops, she has just released her ninth book: Count on Yourself. It’s a wonder she ever finds time to sleep!

Q. Financial institutions would like us to believe that every Canadian who is earning even a few dollars should save in an RRSP or pension plan for retirement. Do you agree? Can you give me examples of cases where this may not apply?

A. Ideally it’s good to save for your retirement one way or another. However, there are a couple of situations where people should examine that automatic RRSP contribution.

Situation 1

A post-retirement net income of less than about $16 000 is about roughly the cut off for a single person with a guaranteed income supplement. There have been a few cases that I’ve come across in the last few months where individuals who were getting the guaranteed income supplement after age 65, get to the required RIFF withdrawal age in their 70’s and suddenly they’re bumped out of that supplement payment which they’ve been relying on. If you think you’re going to be on the edge than it might be better to put it into a tax free savings account or a non-registered account

Situation 2:

Those who may face a claw back from government programs because of higher income. After the age of 65 you get an age amount personal exemption in addition to your existing personal exemption, but that exemption starts to get clawed back after a net income of only about $33 000.

It’s worthwhile looking at that post-retirement income, looking at the government benefits you’re going to get and for higher income people you might be better off and have more flexibility if you deposit to a TFSA or a non-registered account.

Q. What’s more important – paying off debt like a student loan, or starting as early as possible to save for retirement?

A. Students with carry forwards of tuition deductions and a student loan should take the first three or four years post-graduation and really hit that student loan instead of making RRSP contributions. It’s very worthwhile. Then they are in a situation where they can start contributing to their RRSPs without having to decide whether to pay off their student loan or or contribute to RRSPs.

Q.Is it better to contribute monthly or to deposit a lump sum one or more times a year?

A. For most people contributing monthly is a good idea. Investing every month, you’re going to sometimes invest at a market high but you’re going to also invest at a market low, so you smooth out those bumps via dollar cost averaging. Also the discipline is important.

Q. You recently wrote a column advising readers not to take out a loan to max out their retirement savings every year. Can give our listeners a few reasons why you don’t think that’s a good idea?

A. The reality is that rarely do I see it work out even when interest rates are low. It’s not just because the investment return plus the tax deduction has to be higher than the borrowing cost. You also have to pay the money back. The fact is it gets loaded onto the general debt individuals carry for three or four years and they never ever quite pay it off.

Q. How can people find out how much their investments are costing them?

A. The best way to do it is to look at the mutual funds you have. On Morningstar.ca you can easily type in the name of your fund. A report pops up that gives you a snap shot. You’ll see your MER – management expense ratio figure there, and that’s the percent you’re paying.

One thing you need to remember about mutual fund fees is that they have to be considered as a hurdle. The mutual fund has to jump over the hurdle of that 2.5% fee before you even start making money.

Q. How important are fees? If I’m investing $100, a 2.5% fee of $2.50 doesn’t sound like much. How much difference can paying say 1% instead of 2.5% MER on an investment make in terms of accumulated retirement savings over time?

A. It makes a huge difference – in small amounts of money it doesn’t seem to be too much. However, the difference between 1% and 2.5% over 15 years on a $10,000 investment is $5,000 in lost return. The other issue to think of is that not only do high fees reduce your gain, but they maximize your losses – in times of market volatility your losses get magnified.

Q. In your latest book you relate some humorous anecdotes about how people are more ready to discuss intimate details of their sex life than money. Why do you think finances and financial planning so hard to talk about?

A. Not only is money personal, but it also seems a lot of our self worth revolves around money, how much we have, how much we earn. When you poke at people’s self worth by revealing what might make them appear to be negative compared to somebody else, then they start to get very uncomfortable.

We also worry about getting ripped off by the people we’re in a relationship with. But as a result we don’t develop the confidence or the language skills to discuss money when it becomes necessary.

Thanks Alison. It was a pleasure to chat with you. I know Saskatchewan Pension Plan members will be eager to read your new book Count on Yourself and they will also want to check out your articles in the Toronto Star articles and other media.

David Chilton podcast

Hi, my name is Sheryl Smolkin. I’m a lawyer and a journalist. Today I’m pleased to be continuing the Saskatchewan Pension Plan’s new series of financial expert interviews with the Wealthy Barber himself…David Chilton.

The Wealthy Barber has sold more than 2 million copies in Canada, and last year — some 20 years later — The Wealthy Barber Returns was published.

I recently heard David speak at the Human Resources Professionals Association conference in Toronto and was delighted when he agreed to do an interview for the Saskatchewan Pension Plan Financial Expert podcast series.

Welcome David.

Q1. In your first book The Wealthy Barber, the well-to-do barber Ray Miller’s first and most important rule is take 10 per cent off every pay cheque as it comes in and invest it in safe interest-bearing instruments. Why do you think so many people have so much difficulty overcoming their inertia and taking that first important step?

A.1 It isn’t necessary to invest only in interest-bearing certificates. If you are a long-term investor building for retirement, Miller was fine with allocating some of the money towards growth-oriented vehicles like equities or mutual funds that have equities in them, but the basic thrust of saving 10% of every pay cheque is absolutely the key.

The problem today is that we love to spend, and so we resist any savings technique that limits our ability to go out and buy things. Also, society has taken on so much debt that it has squeezed our ability to save. It’s tough for people to set aside 10% of their net or gross income because they’re servicing debt now. We love to spend we love to keep up with the Jones’s, but to some extent, we’re sacrificing our future.

Q2. You acknowledge that it’s only human for the desires of Canadians to run well beyond our stream of “needs” into our pool of “wants,” but still maintain that many people have too much stuff. Do you think people should be making sacrifices today in order save for the future?

A.2 I do. And I hate the word “sacrifice.” It has such a negative connotation. I would argue after seeing thousands of people and their personal finances, that people who are saving successfully are happier, because they’re less stressed about their financial future. They are not caught up in that race to consume as much as they can.

Remember, nobody is suggesting massive cuts to your spending and an austerity budget. Let’s be realistic here, let’s set aside at least 10%, hopefully more. It’s doable. It doesn’t require major cutbacks – just spending a little less here and there to force savings.

Q3. How can people resist the temptation to buy more clothes, or jewellery or electronics – whatever discretionary spending is distracting them from saving for the future?

A3. It’s interesting. People who read my book say even reading about the psychology of spending has helped them have a little bit of a mind shift. But there are some safeguards that you can put in place. The problem in the last 20 years has been the ubiquitous availability of credit. It’s so easy to mindlessly swipe your credit card or write a cheque against your line of credit. If you want human nature to have less ability to sabotage you, take it out of the equation.

So you are seeing more people staying away from lines of credit now and I notice a lot of people going back to a cash-based spending system. They are taking out cash on a Monday and saying, my budget is $450. That money is in their wallet for everything from groceries to gas. When the money runs out, so does the spending. I love that approach because when the money leaves your wallet you feel a little pain and realize it is a finite resource.

When you are swiping debit or credit cards mindlessly, it’s too easy to spend and hard to keep track of. Spending quickly increases to an unacceptable level.

Q4. Tell me about the four liberating words of advice you give to people who come to you for help because they are overspending. Do they really work?

A.4 That is the chapter I hear the most about in the book and it’s a very simple concept. People really expect deep advice from me, but what I say is you’ve got to start saying to yourself and to others, “I can’t afford it.”

It’s hard at first, but when you start saying it then you realize, it’s not admission of failure it’s just accepting the reality. In fact it’s stress reducing because you are accepting the reality, you’re no longer stretching beyond your needs.

I cannot believe all the letters and phone calls I’ve had from people across the country who say they love the chapter. They’ve become used to it, they are embracing it and they are actually enjoying it.

Q5. Home renovation is a bottomless money pit that many people get sucked into in the hope of improving their property value or keeping up with the Joneses next door. When it comes to renovating or anything else, what are the four most expensive words in the English language?

A.5 Since the book has come out, I’ve come to think that I understated the case of excessive home renovation. We’ve received so many emails and letters from people saying if you think your examples are bad, look at mine.

I am not against home renovations. I renovated my own home a few years ago. The problem with home renovation is you do one room like your kitchen or your basement and the rest pale in comparison. And all of a sudden the cycle of renovation rolls on. With lines of credit making cash available, it’s very difficult to resist the temptation. I think of all the people I see who have line of credit problems, about 50% got that way through excessive home renovations.

Q6. The cost of housing has gone up tremendously over the years in Canada. Can homeowners depend on the value in their homes as a source of income in their retirement?

A.6 Well, not really. Seniors don’t necessarily want to sell their home in retirement. They like the neighbourhood. Many don’t move because they want to have the extra space at home so the grandkids can come and stay over. These are the kind of real life things that enter into decisions that so often are forgotten in financial books.

Many people do have a fully- paid home that has in fact risen significantly in value, but they can’t turn it into a financial asset or split an income off from it. They could take out a reverse mortgage, they could take out a line of credit but of course, those have their risks. You’re turning compound interest into your enemy instead of your friend, and a lot of people are hesitant to do that even when it does make some sense.

You have to be well diversified. And I am not against home ownership. In fact I’m very pro home ownership. But I think it is unfortunate how many Canadians I cross paths with who have emphasized home ownership exclusively as they built up the asset of their net worth statement and that’s a tough one because they don’t have any other assets to fall back on or to generate an income in retirement.

Q7. I know from your talk at the HRPA conference and your book that you live in a modest 1300 sq ft. home and granite counters don’t turn you on. What do you like to splurge on?

A.7 Probably more experiences than stuff. I am not a stuff guy at all. I can’t remember the last time I bought anything significant on the stuff front. But I do like to go to sporting events and playoff games, especially of my beloved Detroit Tigers and I’ll take the odd trip and bring my kids along.

I tend to be not a big spender, not because I am cheap. In fact I am quite the opposite. It is more because I don’t get a big kick out of stuff. I like relationships. And my hobbies are relatively inexpensive. Golf, is a little bit expensive, but I’m into a hockey pools and I love to read.

When I do splurge it’s probably on a trip. A second big weakness I have is that I eat out often because I travel so much. I am always on the go, and I don’t know how to cook so I eat out a tremendous amount. I did a spending summary in the process of writing the second book and I went “holy smokers.” It’s not just the sodium content that’s killing me here, it’s the cost too.

Q8. When do you plan to retire?

A.8 Never, I love what I do. I like to travel. I don’t want to travel as much going forward as I get older because it’s a bit of a burden being in an airport every day. But I really do enjoy my career. There are a lot of new things I want to try. I honestly don’t see ever retiring, particularly from speaking. Speaking is a favourite part of my job and I don’t know why I would ever leave it.

Thanks David. It was a pleasure to talk to you today. I know our listeners will be delighted to hear your common sense advice. And if they haven’t already done so, I’m sure they will want to get their hands on a copy of your new book, The Wealthy Barber Returns.

My pleasure. Thank you for having me.

GordonPape podcast

Hi, my name is Sheryl Smolkin. I’m a lawyer and a journalist. Today I’m pleased to be continuing the Saskatchewan Pension Plan’s new series of interviews with financial experts. My guest is Gordon Pape.

Gordon is an author of over 40 books, a newsletter publisher, journalist and all around financial guru. He writes regular columns for the Toronto Star and moneyville.ca among dozens of other media publications.

At age 75, he has just released a new book called Retirement’s Harsh Realities and it doesn’t look like he is planning to retire anytime soon. Today we are going to talk about annuities, and why an annuity purchase can be an important strategy for making your money last as long as you do.

Q. Everyone contemplating retirement has two key questions. How much will I need and how can I be sure I won’t run out of money? How would you answer these questions?

A. How much you need depends on the individual and the type of lifestyle you want to lead after retirement. A study done by Statistics Canada a few years ago found that people in their 70’s were spending about 95% of what they spent when they were in their 40’s. Yet conventional wisdom says you only need about 70% of your pre-retirement income if you want to maintain your standard of living. Based on those numbers it suggests that in fact you need more.

You need to look at your expenses in retirement and your sources of income such as CPP, OAS, an employer-sponsored pension plan if you have one and personal savings. There is no magic number.

You need to plan for the fact that people are living longer. Something to consider especially after the age of 80, is putting some money into a life annuity. It’s not a great place to put your money right now because interest rates are so low, but once the economy starts to pick up again and interest rates start to rise that’s the time to lock in a life annuity that guarantees you an income for as long as you live.

Q. Tell me how an annuity works.

A. You’ve saved money in a RRSP, you’ve converted it to a RRIF at 71 and the government requires that you draw down a minimum amount from that fund each year. As the years go by, unless you’re able to invest at a rate that keeps up with the rate of the minimum withdrawals, the value of the fund is going to eventually drop.

By the time you get to your early to mid 80’s, the depletion rate is too fast. You might consider using a chunk of you RRIF or all of it to purchase a life annuity from an insurance company, in exchange for a flow of income for the rest of your life.

The down side is you don’t have the money anymore. You won’t have an estate you can leave but it will be cash flow for the rest of your life

Q. Why have annuities fallen out of favour recently?

A. Low interest rates and the fact that people don’t like the idea of giving up their capital. They like to be able to control their money, so they can leave something behind for their children. When you buy an annuity you lose that possibility. However, you can buy annuity that guarantees the income for a certain period of time so if you die within the period your children will get some money.

Q. When is the best time to buy an annuity? Why?

A. The longer you wait, the more money you’ll get from the annuity. The company will pay you less money at 65 than 80 because your life expectancy is longer. If you can maintain a rate of return in your RIF around 6% then the optimum time would be within your 80’s.

Q. What questions should retirees and prospective retirees ask when they are shopping for annuities? What different kinds of annuities are available?

A. Research the amount of money that the various insurance companies are offering. There are tremendous variations in the rates that they are offering for the same kind of plan. There are annuity brokers who will do this for you and find you the best offer. There is no one company that consistently pays more than others. Desjardins has come up quite often, but not all the time.

It also depends on the type of plan – i.e. one company may offer money for a straight annuity with no guarantees, where as another company may offer a better rate for a joint and last survivor annuity which means it carries on until the last spouse dies

You also need to give some thought to the company itself – the solvency of each financial institution. There is an insurance fund that covers people in the event that their insurance policy goes belly up, but the fact is that you don’t want that to happen and don’t want to be forced on a fund that has limitations on it.

Q. What does it cost to use an annuity broker and who pays them?

A. The fee will be paid by the insurance company that you eventually do the business with. It’s like a mortgage broker.

Q. If someone came to you for financial advice, what portion of his assets would you advise that he put into an annuity?

A. It will depend on the individual and how large an estate they want to leave.

Q. What are the downsides of annuities?

A. The solvency of the company. Also, if you don’t get inflation protection, over a length of time obviously the purchasing power of the income that you receive is going to decline.

Inflation protection is expensive, in the sense you will get a lower monthly payment than if you do not have inflation protection. On the other hand it will guarantee that as the rate of inflation rises over the years, so will the annuity.

There are also “impaired annuities” for annuitants with a terminal illness. The annuity pays more because the purchaser has a shorter life expectancy.

Q. Would you invest in one yourself?

A. No, not at this point. I am managing my money well enough, and my wife and I have sufficiently large RRIFs that we don’t feel we need to buy that kind of insurance at this time of our life. Down the road when I am in my 80’s I may take a look at it.

Thanks Gordon. It was a pleasure to chat with you. I think Saskatchewan Pension Plan members will be very interested in your comments about annuities. They have the option of purchasing a competitively-priced annuity from the plan until age 71.

Jonathan Chevreau podcast

Hi, my name is Sheryl Smolkin. I’m a lawyer and a journalist. Today I’m pleased to be continuing the Saskatchewan Pension Plan’s series of financial expert interviews with Jonathan Chevreau.

Jonathan was the personal finance columnist for the Financial Post from 1996-1998 and then for the National Post since its launch in 1998 until this year. He has recently been named Editor of MoneySense magazine.

Although he has authored or co-authored seven non-fictional financial books, his most recent work is “a novel about one couple’s turbulent journey to financial independence” called “Findependence Day.” And that’s what we are going to talk about today.

Welcome Jonathan.

Q. Is the expression “Findependence Day” a Chevreau original or has it been used before by others?

A. I would say it is a Chevreau original although at one point there was an unrelated film called Findependence Day. I just looked at the American Independence Day, played around with financial independence and came up with “Findependence Day.” The title came first, and then I thought I should write a book to go with it.

Q. You are known as a financial writer who writes serious articles and books about complex financial matters. What made you decide to write a novel?

A. I think like a lot of journalists there was always a secret closet novelist lurking because it seems like a more creative, long-term project than bashing out daily columns. Then there is always the example of David Chilton’s The Wealthy Barber.

Q. Although Findependence Day is clearly fiction, some of your characters and concepts seemed very familiar to me, so I have to ask you:

• Is Didi Quinlan of the television program Debt March based on Gail Vaz- Oxlade’s show ‘Til debt do us part?

Well like most fictional characters it’s a composite, I would say she’s was certainly one of three or four people, keeping in mind the book was also written for the US market. We have a lot of financial reality TV shows now. When I talk to American journalists they’re convinced I am talking about Suze Orman. But I would say that Gail is probably the single closest model.

• Were you thinking of Stewart McLean’s Vinyl Cafe when you created “The Vinyl Cave?”

Actually, that was based on Kate Dunn’s Vinyl Museum around the turn of the century. Then Peter Dunn had two Vinyl Museum stores in Toronto – one was close to where I lived on the Lakeshore.

• Did you draw on Finance Professor Moishe Milevsky’s characterization of people as either “stocks” or bonds” as discussed by the financial advisor Theo in the book?

I think I actually did credit Moshie’s book in the fine print or in “Theo’s library”at the end of the book.

Q.  In the opening chapter, television host Didi Quinlan tells the young couple Jamie and Sheena Morelli that she is going to drill two words into their skulls: guerilla frugality. Is this phrase also a Chevreau original and what does it mean?

A. Yes it is original. I came up with that expression in a column long before I wrote the book. To me it’s like guerrilla warfare. In order to save and invest you have to first get out of debt, and then you have to continue to be frugal in order to build wealth. What I mean by the term is “guerrilla warfare on the economic consumption front.”

Q. Another thing Theo, the financial planner in the book advocates is developing different streams of income on the road to financial independence. Does that mean moonlighting or working at more than one job? Is that practical for hard-working, busy parents?

A. Ideally you can always give yourself a raise. You can get a raise from your boss or change jobs and earn a higher amount. You can aIso take on extra work to earn another $10,000 or more on nights and weekends but this may be stressful and perhaps not the optimum approach if you have a young family.

Ultimately as you know anybody who is a retiree probably does have multiple streams of income – two or three pensions, government benefits and private savings in a RRIF. But when we’re in the wealth accumulation phase, if both partners are employed we tend to be dependent on one or two different sources of income.

You have to go from one or two salaries to these multiple sources of income when you become financially independent and ultimately when you are in full stop retirement.

Q. If you could identify one or two key messages in the book for people striving to achieve financial independence, what would they be?

A. If your goal is financial independence or findependence, the means is guerilla frugality. The two go together. So be frugal first to get rid of your debt and second to build wealth. These are the key takeaways in order to achieve what I call Findependence day.

Q.Have you reached your Findependence day, and if not what is the magic number?

A. I used to put anywhere from 57-64 on my blog, the Wealthy Boomer. Right now I’ve joined MoneySense magazine at 59 years old. I guess my partner and I have achieved financial independence of sorts, but we want to achieve a higher level. I am at the stage of working now because I want to, not because I have to. And as you know everything gets better the longer you wait.

I enjoy what I do and I don’t find there’s a big distinction between what I do evenings and weekends and what I do during the day. I’m up reading all this stuff on twitter and social media and I might as well get paid for it as long as I enjoy it and I’m healthy. The thing is, at some point, I may not have a willing client, or a willing employer even if I want to work to 70 or 75. At some point we all must have financial independence because our body or our minds won’t permit us to earn the single employment stream that most people rely on.

Thanks Jonathan. It was a pleasure to talk to you today. I read your book cover to cover and learned a great deal. I actually joined the SPP to get “another stream of income” although I have an employer-sponsored pension plan. If they haven’t already done so, I’m sure many SPP members will be interested in ordering the book from your website.

It was a pleasure Sheryl. There’s actually a question and answer about the Saskatchewan Pension Plan in the June issue of MoneySense.

Derek Foster podcast

Hi, my name is Sheryl Smolkin. I’m a lawyer and a journalist. Today I’m pleased to be continuing the Saskatchewan Pension Plan’s series of financial expert interviews, talking to Derek Foster author of six books including The Idiot Millionaire.

After spending his 20s backpacking across Europe, Australia and Asia, Derek left the rat race at age 34 when his investment strategy made him a millionaire. Today we are going to talk about his latest book, The Worried Boomer.

Welcome Derek.

Q1. Derek, you retired six years ago at age 34 and started a new career as a financial writer and motivational speaker. Was this all part of the plan? Did you ever imagine you would be so successful?

There was no a plan at all. The only thing I did was to begin investing religiously just before I started university. I put away $200 a month and it kept growing and growing. But as far as writing a book, once I retired I thought it was an interesting story so I wrote a book and it became a national best seller. I thought this was kind of great so I wrote a few more books.

Q2. Because you are your own boss, you have more time to spend with your family and do things you enjoy. How much time do you spend writing and speaking in a typical week or month?

It really varies depending on the season. I find I do a lot of my writing in the fall after summer vacation is over and the kids are back at school. But if I was to average it out, I would say probably around ten hours a week.

Q3. Everyone I talk to is worried that they will run out of money before they run out of time. How did you figure out how much money you had to save in order to retire at such a young age?

I think a lot of people put the cart before the horse. In other words, if you ask people how much money they need to retire, many will respond “oh you need a million dollars or two million dollars.”

But if you ask “how much money do you need to live on now?” they’ll generally say $50,000 a year or $100,000 a year. The interesting thing is that they tell me the annual income they need to live right now, but for retirement they fixate on this big lump sum of money.

I think you need an annual income when you retire. So essentially all you have to do is build up an annual income stream and once it equals what your expenses are going to be, you can stop working.

Q4. You have five children. You own a four bedroom, four bathroom house in Ottawa and your family has taken trips almost every year since you have retired on less than $40,000/year. How can you afford this lifestyle? What don’t you do?

I think the main thing I don’t do is that I don’t work. It’s going to sound kind of strange, but working is the most expensive way to make money in Canada. When you’re working at a regular job, you pay Canada Pension, you pay employment insurance, you also pay income tax at the top marginal rate. And those are just the direct costs of working.

There are a whole slew of indirect costs of working. You might need to pay for a wardrobe, union dues, commuting costs, parking costs or child care expenses if you’re at that stage in life. So I basically realized that working was too expensive and I couldn’t afford it so I stopped working.

That was a big part of it, and the other thing too is that I’m not really a “stuff” guy. I don’t find I buy a lot of gadgets. For example I’ve never owned a cell phone. In my twenties I spent a year travelling around Australia and New Zealand. I had the time of my life and all my worldly possessions were contained in one backpack. So I think that’s another part of it as well.

Q5. How would you respond to people who say that they are already living so close to the line that there is nothing left over for savings?

I think sometimes people look at saving enough money for retirement as if they have to achieve the whole thing all at once. Make it simple. Start with $2 a day. Take a toonie every day from your change and throw it into a jar. At the end of the month you’ll have sixty bucks. Keep doing that month after month. If you started when you were twenty and stopped at the traditional retirement age of sixty five, you’d end up with something like $628 000 just by saving toonies which is a pretty good start. If you up that to $5 a-day you’ll have one and a half million dollars which is very good start. So start small.

Q6. You invested in the stock market to make your million, yet so many people over the same period lost almost everything. What’s your secret? How do you pick stocks?

I am not really that smart a guy so what I did is I tried to copy other people. The absolute best investor in the world is a guy by the name of Warren Buffet, and I read a lot of what he had to say about investing and copied him.

And the approach, which is really quite simple, is invest in only companies that are easy enough for a six year old to illustrate with a crayon. You want companies that sell the same boring product year after boring year. An example would be Colgate toothpaste. I mean if I invest in Colgate toothpaste all I have to rely on is that you’re going to keep brushing your teeth, and I think that’s a fairly safe bet.

Now if you look at the company they’ve paid uninterrupted dividends since 1895 so basically for 117 years, anybody who has ever owned Colgate stock has received their dividends. Which is great, so focus on those kinds of companies. Forget the casino approach where you’re looking for the next hot thing. I mean ten years ago a lot of people chased Nortel and that didn’t work out very well. Again, keep it simple.

Q7. The Worried Boomer is a primer on various types of financial instruments in which people can invest their retirement savings for retirement, but you also devote a chapter to the Saskatchewan Pension Plan. What do you think are the advantages of saving in the SPP instead of in an RRSP?

There are a couple different advantages. The first one is it’s very easy. I enjoy sitting down and reading annual reports and considering where to invest, but surprisingly some people don’t enjoy that. But the SPP allows them to just make a contribution and forget about it. It’s basically a set and forget kind of plan, which is good for a lot of people.

The second factor that I really like is that the costs are really low. If you invest in traditional mutual funds you’ll pay much higher fees than you will with the SPP. The differences can be huge. We’re talking tens, and in some cases hundreds of thousands of dollars difference just by saving on the fees.

And the third factor is that it has a very good long-term track record. I think returns have averaged around 8% over the last 25 years which is really, really good. Also in the 2008 stock market downturn the SPP fund it went down much, much less than the overall markets did.

Q.10 Do you think your savings will last for the rest of your life or do you anticipate having to going back to work for someone else some day?

No I don’t anticipate having to go back to work because I rely on dividends. Let’s suppose my money is a seed and I’ve planted a tree with it. Now the traditional investor lets his tree grow for a few years and then he wants to chop it down for fire wood and make a big gain. I am not doing that.

What I’ve done is I’ve planted a tree that’s bearing fruit every year. Every year I harvest the fruit. The next year I do it again. That’s essentially what I’m doing with the dividends. The money just keeps re-appearing every year. It’s almost like I have a little printing press downstairs, down in my basement where I’m able to print new money every year as I need it. So no I don’t really anticipate ever really running out of money.

Thanks Derek. It’s been a pleasure talking to you. I’m sure listeners will be inspired by your story and look forward to hearing more about you and your family’s financial adventures in the years to come. The worried Boomer and Derek’s other five books can be purchased from his website at www.stopworking.ca.

Ellen Roseman podcast

Hi, my name is Sheryl Smolkin. I’m a lawyer and a journalist. Today I’m pleased to be kicking off the Saskatchewan Pension Plan’s new series of interviews with financial experts. My first guest is Ellen Roseman.

Ellen is a journalist and author of five books who has been advocating for the consumer rights of Canadians for the past 35 years. She is a Toronto Star columnist, a fellow blogger on moneyville.ca and she has her own blog “On Your Side.” In January, she was featured on an episode of CBC Marketplaces called “Canada’s Worst Customer Service: Store Edition.”

But Ellen is also passionate about financial literacy and she has been teaching courses in investing and personal finance in the University of Toronto’s Continuing Studies Department since 2004. She also does Financial Basics workshops at Ryerson University. Financial literacy is what we are going to talk about today.

Q. Ellen, why do you think Canadians are so uneasy about their money skills?

A. We don’t learn much about money in school. In the past we used to learn from our parents but today many parents are uneasy about their money management skills and they’re not sure how to bring up their kids with good habits. It has also become a lot more complex and intimidating. For example, look at the number of retirement plans and many of the tax rules are getting more complicated

Q. How important is it to educate our children about money? When should parents start?

A. It’s probably good to start at a young age – like when children are younger, they tend to think that using the ATM is like the lottery and it’s free. You can also go to the grocery store and explain how much different items cost. It’s a delicate balance, but I think it’s a good idea to get your children used to using money and open a bank account at around 6, 7 or 8 years old.

Q. What resources are available to parents to help them educate their children about money?

A. The Canadian Banker’s Association put together a whole network of websites including their own and those of other financial institutions called “There’s something about money.” There are also a lot of financial institutions that have children’s resources on their own websites like Canada Saving’s Bonds. In addition, all the big banks are pretty good about having places where kids can read up and play money games. The approach is almost as entertainment rather than true education, because they learn through being interactive and playing

Q. The Federal Task Force on Financial Literacy recommended over a year ago that provincial and territorial governments put financial literacy into the formal education system. To what extent, if any has progress been made in the implementation of this recommendation?

A. British Columbia led the way even before the Financial Literacy Task Force because they have a compulsory course in Grade 10 and they make great use of the Financial Consumer Agency of Canada’s resource called “The City.” It’s interactive and it lasts for about 18 or 20 hours. Teachers use it in their classes

Manitoba and Ontario decided rather than one course in high school, they wanted to integrate financial education throughout the school system. So starting at about Grade 3 or 4 and going all the way to the end of high school, they introduce it it into things like math, economics and other courses. This process is harder and takes longer.

It’s going quite well in Manitoba, but Ontario is having some problems. A lot of teachers don’t feel very comfortable about teaching about financial issues.

Q. In one column you suggested that financial literacy means saying no to business interests in the schools. Can you tell me a little bit about why this is a concern and what the alternatives might be?

A. We already have a lot of business interests targeting schools. For example, Visa Canada wants to introduce a course about responsible spending. The course is totally sensible but the sponsor is aiming to get kids indebted by the age of 18, continuing for the rest of their lives

The Canadian Banker’s Association has a program where they send banker’s into schools to talk to students about money just as a one-time thing. But there is a little too much emphasis on RRSPs which really isn’t relevant to 16 or 18 year olds. There should be more about basic budgeting skills, deciding between a want and a need, and making sure not to overspend.

Q. Even if financial literacy programs become standard fare in high schools, how can we ensure the programs are engaging and interesting for young people so they don’t just tune out?

A. Make it relevant to people’s lives and the issues they’re experiencing at the moment.

Children in high school have some immediate needs. They need to know about the cost of post secondary education and how much that will be in dollars and cents. Who is going to pay for it? How do you manage a student loan? How do you pay for transportation? What’s the cost of all the gadgets they buy? Why it doesn’t make sense to buy with a credit card if you’re still paying it off a few years later and yet you’re ready to move onto the next device.

Q. You have been teaching basic investment concepts to adults for many years. What do you tell them about the role of a financial advisor, and the questions they should ask before signing on with one?

A. It’s very important for people to have a good financial advisor. Five to 10% of Canadians can actually be their own financial advisor but the rest need some financial advice.

Many of the people out there dispensing financial advice are working for big banks and other financial institutions. They are basically sales people who get incentives to accumulate as many assets under management and they encourage them to borrow to invest. Their whole expertise is about the accumulation phase, which is building up assets towards retirement but there’s a big gap once people retire or are about to retire. Many financial advisors are not skilled in how to keep more after-tax income in your pocket.

Check their references to make sure they’re registered. Do online research

Make sure they listen. If they’re diagnosing and recommending before they get to know you that usually means it’s some kind of off the shelf solution instead of a custom approach.

Finally, don’t get too friendly with them. Once your lives get too intertwined it’s pretty hard to fire them. Friendship should never interfere with a business relationship.

Thanks Ellen. It was a pleasure to chat with you. I know Saskatchewan Pension Plan members will be eagerly awaiting the release of your new book 99 Ways to Fight Back and they will also want to check out your Toronto Star articles and your blogs on moneyville.ca and ellenroseman.com.