Do’s and Don’ts to Protect Your Finances in Times of Uncertainty


Do’s and Don’ts to Protect Your Finances in Times of Uncertainty


Are your family’s finances prepared for times of uncertainty? Few could have foreseen the Coronavirus pandemic affecting Canadians as much as it has. If you’ve prepared in advance for this, give yourself a well-deserved round of applause. If you didn’t prepare, don’t panic. It’s not too late to do so. Things will get better.

Here are some do’s and don’ts to protect your finances in times of uncertainty.

Don’t Panic

When the stock market drops, the single worst thing you can do is sell your investments at a huge loss. But that’s the gut reaction for a lot of Canadians. The old saying is “buy low, sell high,” not “sell low, buy high,” but you’re doing the exact opposite when you sell your investments after a major drop in the stock market. When you’re investing in something volatile like stocks, it’s important to keep in mind your time horizon. Time horizon is how long you anticipate before you cash out your investments.

History has proven that stocks provide a better rate of return than bonds over the long run. If you’re investing in stocks, mutual funds or ETFs in your child’s RESP and your child isn’t going to college or university within the next 10 years, there’s no need to panic when the stock market drops in value. Your child still has plenty of time before she or he needs the money.

While you should certainly keep an eye on the long-term trend, by watching what the stock market is doing minute by minute, all you’re going to do is giving yourself a headache. As difficult as it may seem, in instances like this it’s best to not pay attention to the stock market, otherwise, you could find yourself making a poor decision.

Do Look for Buying Opportunities

Nobody likes it when the stock market goes down in value, but there is a silver lining to it. If you have spare money to invest, it’s a great buying opportunity. Think about it like a sale at your favourite retailer, but instead of it being a sale at the mall, it’s a sale on stocks. When the stock market goes down in value, you can obtain your favourite stocks at a discount.

While you probably shouldn’t try to time the market, when a blue-chip stock goes down in value, you know it will almost always bounce back, so why not consider buying it while it’s at a discount?
Do Have an Emergency Fund

It’s hard to say when the next recession will be. It could be tomorrow; it could be 10 years from now. Nobody can say for certain when it will happen, but it will happen. Wouldn’t you rather be prepared instead of being caught off guard?

You can do that by planning for the worst. A good start is having three to six months’ living expenses in a high-interest savings account. That way you can withdraw the funds the next time something comes up, rather than going into debt to cover emergency expenses.

Don’t Hoard the Essentials

Be friendly to your neighbours and don’t hoard the essentials during a time of uncertainty. While you may feel better if you buy enough toilet paper to last you until the next millennium, your neighbour may miss out on the opportunity to purchase some for themselves due to your hoarding nature.

Similarly, if you buy all the hand sanitizer a store has, you may be able to protect yourself, but what about your neighbours who couldn’t get any because it was “sold out” at all your local retailers? If they don’t have any, not only are you putting their health at risk, you’re putting your own at risk too. There is enough for everyone, if we all just take only what we need.

Do Stick Together

Going through times of uncertainty is never fun. However, despite physical distancing, we can still stick together with your family, friends, neighbours and coworkers by lending a helping hand. Something as simple as offering to pick up groceries for your elderly neighbour can go a long way, and make it easier for everyone to get through this.

For more information on building your child’s RESP’s contact Karen Wallace at Knowledge First Financial. 

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