30 Nov

B.C. home affordability takes a hit as prices rise in tightened, hot market…don’t wait till spring!

General

Posted by: Angela Calla

It’s getting harder to buy a home in B.C. as an increasingly hot real estate market pushes prices higher, according to an RBC report on housing affordability released Wednesday.

“We’re talking about a very expensive market in Vancouver,” RBC senior economist Robert Hogue said in an interview. “Mortgage payments there take a much bigger chunk [of paycheques]. And it appears the rebound in the market has been stronger there than in other parts of the country. It has been quite an astonishing rebound.”

According to the report, B.C. and Vancouver posted the biggest increases by far across Canada in the RBC index measures.

“The cost of home ownership in B.C. increased in the third quarter following five consecutive declines — cumulatively the steepest drop since the early 1990s,” the report by RBC Economics Research concluded. “Notable rises in home prices in the province’s large urban centres and the modest pick-up in mortgage rates have boosted typical mortgage payments for the first time since early 2008.”

It said the Vancouver market “continues to roar back in a spectacular way and property prices are now heating up closer and closer to a boil.”

But that’s no surprise to Cameron Muir, chief economist for the B.C. Real Estate Association, who said Vancouver prices might even be rising faster than the RBC report suggests.

“[Prices] are beginning to scratch near record levels,” Muir said in an interview. “Affordability in Vancouver has likely eroded a bit more than RBC’s third quarter numbers suggest. It’s a three-month average [and] we’ve seen prices climbing since the summer months.”

However, Muir also suggested that while home sales will remain relatively strong next year, 2010 prices will moderate as pent-up demand is satisfied and interest rates move up a bit. “Our forecast for 2010 won’t be as hot as what what we’ve seen in the past few months.”

Nationally, the RBC report concluded that the cost of home ownership became more expensive for the first time since the spring of 2008 across all housing segments.

Hogue said that home affordability deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and because of property appreciation. Despite that, he added, “affordability measures have still shown improvement from a year ago.”

Hogue, who also said that it seems unlikely that affordability will improve in the near future, added that he doesn’t know why the Vancouver and B.C. markets are stronger than the rest of Canada. “It’s a phenomenon I find fairly puzzling, given that it’s such an expensive market to begin with.”

According to the report, the RBC housing affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home. During the third quarter of 2009, the measure at the national level rose across all housing types. The benchmark detached bungalow moved up by one per cent to 40.2 per cent of pre-tax income needed, the standard townhouse rose by 0.7 per cent to 32.3 per cent, the standard condo climbed by 0.5 per cent up to 27.6 per cent and the standard two-storey home increased by 1.2 per cent to 45.8 per cent.

In B.C., the measure in the third quarter for a detached bungalow stood at 60.8 of pre-tax income and for Vancouver at 66.8.

The report said the rally in the B.C. housing market since the lows reached in early 2009 “is now running up faster relative to the supply of homes available for sale — which was widely outstripping demand as recently as this spring — and has led to a firming trend in prices since summer.”

For Vancouver, the report’s conclusions were even more striking.

“Resale activity has surged since spring and the rebound has more than fully reversed the dramatic drop that occurred in 2008. The concomitant rise in the number of units available for sale has been more subdued, which has considerably tightened the market. In fact, the ratio of sales to new listings has returned to levels last seen in 2005 and early 2006 when prices were rising at a double-digit annual pace.

“This near-frenzied tone to the market is occurring despite still historically poor, and now deteriorating, levels of affordability.”

The report concluded that the average price of a detached bungalow in the third quarter in Canada was $303,700, down 0.6 per cent from the same period in 2008. For B.C., the average price was $501,600, down 1.1 per cent in a year. Vancouver’s average price was $610,700, a drop of 0.3 per cent. The report also noted that people in Vancouver and B.C. required the highest qualifying incomes to buy a standard condominium — $57,100 in B.C. to buy a condo for the average price of $275,600 and $70,600 in Vancouver for a condo worth $351,500.

25 Nov

The low of the low for fixed rates is now

General

Posted by: Angela Calla

Bond Yields Approaching Key Lows

People shopping for a fixed-rate mortgage can do the happy dance.  Government bond yields keep plunging, and that’s pulling down fixed mortgage rates.

  • The 5-year yield (a barometer of 5-year fixed mortgage pricing) has broken through key 4-month support levels. 
  • The 2-year yield has given up almost all of its massive October run-up
  • The 1-year yield is approaching its all-time low of 0.43%.

We’ve already seen several lenders cut rates, and the best rates for 1- to 10-year terms will likely further in the short term.

However oppsed to commiting to lowering there rates across the board lenders are offering many quick close specials.

Inquire at 604-802-3983 for details.

 

25 Nov

BC housing affordability..will creep up again in spring, the time to buy is now

General

Posted by: Angela Calla

B.C. housing affordability deteriorates as Vancouver market surges forward: RBC Economics

TORONTO, Nov. 25 /CNW/ – B.C. posted the biggest increases in homeownership costs in the country in the third quarter and costs will likely remain well above long-term averages, according to the latest housing report released today by RBC Economics.

“While all provinces and major markets experienced diminished home affordability during the third quarter, British Columbia led the way with the largest rise in costs across all housing types,” said Robert Hogue, senior economist at RBC. “We believe this marks the end of the affordability improvement in the province, with the cost of homeownership remaining fairly high in the near future.”

The RBC Affordability measure for British Columbia, which captures the proportion of pre-tax household income needed to service the costs of owning a home, rose across all four housing classes in the third quarter of 2009 (the higher the measure, the more expensive it is to afford a home). Affordability of the benchmark detached bungalow moved up to 60.8 per cent, the standard townhouse to 47.4 per cent, the standard condo to 34.0 per cent and the standard two-storey home to 67.6 per cent.

According to the RBC report, the Vancouver housing market continues its spectacular rebound, with property prices now heating up and poised to boil over Sales of existing homes have surged since the spring and demand is outpacing supply, leading to a more competitive market and the reemergence of bidding wars.

“The near-frenzied tone of the Vancouver market is occurring despite still historically poor, and now declining, levels of affordability,” noted Hogue.

RBC’s Affordability measure for a detached bungalow for Canada’s largest cities is as follows: Vancouver 66.8 per cent, Toronto 48.6 per cent, Ottawa 39.2 per cent, Montreal 37.5 per cent and Calgary 36.7 per cent.

The report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including Vancouver and Victoria. For these cities, RBC has used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.

The property benchmark for the Housing Affordability measure, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condo. The higher the reading, the more costly it is to afford a home. For example, an Affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Highlights from across Canada:

 

 

    –   Alberta: The province experienced the first increase in homeownership

        costs since late-2007, in the third quarter. Housing market activity

        has picked up and stabilized with the modest rise in costs

        attributable to higher mortgage costs rather than a rise in property

        values. Attractive affordability levels and a return to economic

        growth should fuel housing demand in Alberta next year.

 

    –   Saskatchewan: With mortgage rates rising slightly and properties

        gaining value, owning a home became slightly less affordable in the

        province, following steady improvement for more than a year. However,

        homeownership costs remain historically high in Saskatchewan as a

        result of the sharp price appreciation that took place during the

        recent housing boom.

 

    –   Manitoba: Despite slight increases in the cost of homeownership – the

        smallest amongst all provinces in the third quarter – Manitoba’s

        housing market remained relatively affordable. Market conditions in

        the province appear tightly balanced, which should sustain solid

        resale activity in the near-term. Job growth and a faster economic

        expansion next year should maintain solid housing demand.

 

    –   Ontario: After a period of declining property values, the Ontario

        housing market appears to be bouncing back with home resale prices

        returning to and, in some cases, surpassing earlier peaks. While this

        reversal has brought confidence back into the market, third quarter

        affordability levels have deteriorated for the first time in over a

        year.

 

    –   Quebec: Broad-based vigour in the housing market fueled by the

        earlier drop in mortgage rates to historically low levels, has sent

        property values to new highs in many parts of Quebec. Consequently,

        housing affordability deteriorated in the province for the first time

        in more than a year during the third quarter.

 

    –   Atlantic Canada: Housing on the east coast continued to be among the

        most affordable in the country, with Atlantic Canada experiencing

        moderate but steady gains in property values sustained by a gradual

        increase in the sale of existing homes. Increases in homeownership

        costs in the region, in the third quarter, were modest relative to

        other provinces, with levels mostly below national averages.

 

25 Nov

How many Credit Cards should you have?

General

Posted by: Angela Calla

How many credit cards should you have?

When banks introduced Canada’s first credit card, Chargex, in 1968, it was designed as a convenient tool for their most valued customers. Today’s creditors have a more egalitarian approach — it seems that if you have a pulse, you can have a credit card.

But why stop at one? According to Statistics Canada, there are 3.1 credit cards in circulation for every Canadian over the age of 18 — that’s 74 million cards.

According to Laurie Campbell, program manager for the Credit Counselling Service of Toronto, it’s not uncommon for people to carry eight or 10 cards and a debt load of $30,000 or more. “The biggest problem we see is overspending with credit cards,” she says. “There is a direct correlation between debt and the amount of credit cards you have.”

Canadians charged more than $170 billion to Visa and MasterCard in 2004, compared to $39 billion in 1990, according to Statistics Canada.

“People don’t see it as real money and that leads to impulse spending,” says Campbell. Indeed, studies show the average person spends 112 percent more on a credit card than he would if using cash.

As a result, people are living beyond their means. As many as 50 percent of credit card users don’t pay their balance each month, opting instead to carry debt and pay interest ranging from a 1.9 percent introductory rate to almost 30 percent on some retail cards.

Credit flux

“We don’t recommend consumers carry a balance,” says Scott Hannah, executive director of the Credit Counselling Society in Vancouver, B.C. Sometimes, however, it’s unavoidable when essential expenses arise, such as auto repairs. The key is recognizing the difference between a want and a need. “Easy and quick access to credit really obscures thinking,” he says.

Credit has never been more accessible. With more than 600 institutions issuing Visa and MasterCard cards, add to that the retail card market (24 million in circulation), and it’s easy to see why wallets are bulging with plastic. In 2003, Canadians received 191.7 million credit-card offers — about six for each person — according to market research firm Mail Monitor.

It’s a competitive market and credit card companies profit from interest and user fees. These days, juggling more than one card or carrying a balance is made easier because a standard minimum monthly payment is as low as two percent, whereas it used to be 5 percent. But remember, if you owe $5,000 at 18 percent interest and pay only the minimum each month, it will take about 30 years to pay off the card (that’s if you never use it again).

“People can carry a lot more debt,” Hannah says. “It’s easier to spend, but harder to pay back.”

The perks of credit

On the flip side, credit cards are hugely convenient and by today’s standards, a necessity — you can’t even rent a movie without one. With more transactions taking place on the Internet, a credit card is handy for finding deals on books or flights. Some cards also have benefits, such as travel insurance, member discounts or points programs.

Retail cards, while charging interest in the 24 to 28 percent range, offer lucrative reward programs and discounts. It’s OK to take advantage of such perks, but Campbell cautions there’s no real benefit if you carry a balance.

“It may make sense to have a credit card for a favourite retailer,” says Hannah, but not one for every store you shop at.

The magic number

Experts agree that in most cases one card is enough.

It used to be that some outlets only accepted one type of card, so it made sense to have a Visa, MasterCard and maybe an American Express, but those days are over. “If you have an all-purpose card, 99 percent of the time you’re going to be able to use that card,” says Campbell.

Hannah seconds the one-card rule, but he recommends keeping business expenditures separate with two cards.

Christine McDonald, a spokeswoman for the Financial Consumer Agency of Canada, says the key is “making sure you use the credit you have wisely.” She warns juggling too many cards makes it harder to keep track of spending and payments and hurts your credit score.

One’s credit rating is based largely on credit outstanding, but how much credit you have at your disposal is also considered. Even if there’s nothing owing, just having cards can influence lenders when it comes to granting a mortgage. Several credit cards indicate the potential to get in over your head fast.

Credit cards do help establish a credit history, but Campbell says “people don’t need more than one to build up their credit rating.”

Choosing a card

It’s important to choose the right card. As a general rule, those who carry a balance are better off paying a small annual fee for a low-interest-rate card, while those who pay in full each month may opt for a standard higher-rate card.

Cutting credit

When credit card spending is out of control, the best thing to do is cut up the cards and pay down debt. For some people it makes sense to consolidate debt with a lower-interest line of credit. Otherwise, Campbell recommends paying off the card with the highest rate of interest first. A credit counsellor can help explore the options. Once the debt is paid, contact the issuer and close the account.

Credit cards are two-faced — they’re convenient and come with plenty of perks, but can lead to trouble if you overspend or juggle multiple cards. One, perhaps, two, is all most people need — anything more is playing with fire.

 

 

Transmitted by CNW Group on : November 25, 2009 05:00
17 Nov

Canadian Housing Observer coles notes

General

Posted by: Angela Calla

*CMHC released its 2009 Canadian Housing Observer yesterday.
 
*Most of its findings are dated back to year-end 2008, but it contains some interesting tidbits nonetheless.
 
*One key takeaway is the massive importance of Canada’s real estate industry. It’s a point that can’t be overemphasized, with housing-related spending accounting for one fifth of our economy.
 
*CMHC’s report says that as of December 31st, 2008, there were $903 billion worth of mortgages outstanding in Canada.
 
*Canadians say their top three financial priorities are retirement savings (50%), homeownership (47%) and regular payments to reduce or eliminate debt (41%), but not everyone puts their money where their priorities are, according to results released today for the RBC Financial Priorities Poll.
 
*Nearly half of Canadians with homeownership as a priority (47%) don’t put money towards it. Four-in-ten of those with retirement savings as a priority don’t put money towards this goal. Canadians were more successful with their debt reduction, with eight-in-ten putting money toward this priority.
17 Nov

Mortgage Bytes

General

Posted by: Angela Calla

Mortgage Bytes

*New home prices rose more than expected in September as Canada’s real estate market showed further signs of recovery. 
 
*Statistics Canada said last Thursday its price index rose 0.5% during the month – the biggest monthly increase since January 2008 – following a 0.1% gain in August. Economists had forecast an increase of 0.2% in September.
 
*Prices rose the most in Vancouver, up 1.4% from August, followed by Ottawa-Gatineau, up 1%. Calgary was 0.6% higher, and Toronto, Oshawa, ON and Saskatoon were all up 0.5%.
 
*The biggest declines were in Windsor, ON, down 0.7%, Sudbury, ON and Thunder Bay, ON, both down 0.5%, Victoria, off 0.2%, and Edmonton, where prices were 0.1% lower.
 
*Yesterday CAAMP released its fall consumer report, the Annual State of the Residential Mortgage Market in Canada.
 
*The report, compiled by Will Dunning, CAAMP’s Chief Economist, reveals that overall Canadians are optimistic yet cautious about the housing market rebound.
 
*Canadians are decidedly more optimistic this year about whether now is a good time to purchase a home: 61% feel that it is, nearly double the response from this time last year when only 38% felt that way.
 
*The report found two thirds of all mortgages are fixed for terms of four or more years, with five-year terms remaining the most popular at 56%. Many people who took out a mortgage in the past year, however, chose a shorter term, with 20% at one year or less.
 
*68% of mortgage holders have fixed-rate mortgages, while 27% have variable- and adjustable-rate mortgages. Fixed-rate mortgages are the most popular among people between the ages of 18 and 34, while those in the 55+ age group are more likely to prefer variable-rate mortgages.
 
*Canadians take out equity for two primary reasons according to the report: debt consolidation and renovations. One third of Canadians said the home renovation tax credit influenced their decision to renovate and 30% of equity taken out in the past year was for renovations ($12 billion of the total $41 billion in equity takeout), with an average take-out of $41,000). 
17 Nov

Home sales hit record high; outlook upgraded

General

Posted by: Angela Calla

Homes sales hit record high; outlook upgraded

John Morrissy, Financial Post 

OTTAWA — Home sales hit a new record high in October, leading the Canadian Real Estate Association to boost its outlook for 2009 and 2010.

Resale home activity was up 41.5% in the month, reaching a total of 42,288 units. On a seasonally adjusted basis, homes sold on the Multiple Listing Service totalled 45,818 units in October.

“Low interest rates and upbeat consumer confidence continue to release the pent-up demand that built late last year and earlier this year,” said CREA president Dale Ripplinger. “The release of that pent-up demand has boosted national sales activity to new heights and is drawing down inventories.”

Further, said Millan Mulraine, economics strategist at TDSecurities, “we expect the recent strong gains in the housing market to remain largely intact, though we suspect that the back-to-back double-digit advance in sales seen earlier this year may not be repeated.”

As a result of the sector’s strong performance, CREA increased its forecast for sales in 2009 by 6.6% to 460,200 units. For 2010, the national industry group said sales would rise 7% to 492,300 units.

The average home price also reached new highs in October, climbing to $341,079, up 20.7% from a year ago.

A separate measure, which limits its focus to Canada’s major markets, showed the average price rising 22.1% to $373,095.

At the same time, the sharp rise in housing demand has eaten into inventories. With 194,994 homes listed for sale in Canada at the end of October, the number of listings is 20.8% below the peak reached in October of last year.

It is the sixth month in a row in which inventories have fallen from year-ago levels, bringing supply to 4.1 months on a seasonally adjusted basis, the lowest level in more than two years.

CREA chief economist Gregory Klump said new listings are expected to rise in coming months in response to headline average price increases.

New monthly sales records were set in about one fifth of local markets in October, including Toronto, Montreal and Ottawa. On a provincial basis, new records were set in British Columbia, Ontario and Quebec, largely as a result of increased activity in those provinces’ major markets.

Canwest News Service

 

17 Nov

The 3 year variable broken down

General

Posted by: Angela Calla

Variable-Rate Mortgages: 3- or 5-Year?

November 16, 2009 

We’ve seen a noticeable increase in the number of people making variable-rate mortgage inquires. 

Perhaps it’s because the media keeps reiterating how the Bank of Canada won’t be upping rates until at least Q3 of next year.

Whatever the case, the popular options for closed variable-rate mortgages have been:

  • 3-year variables near 2.15%
  • 5-year variables near 2.10%

Which is the better?  The answer is not that obvious.

If variable-rate spreads remain the same, then whichever mortgage has the lower rate will entail the lowest cost (other things being equal).

However, if variable-rate spreads change in 3 years, it’s a different story.  (Note: we’re talking about the spread from prime changing, not prime itself).

For example, suppose variable rates improve from today’s prime – 0.10% to prime – 0.35% in three years.  In that case, the 3-year variable comes out ahead—even though its rate was initially higher.  On a $200,000 mortgage amortized over 25-years, the 3-year variable strategy would be roughly $409 cheaper than the 5-year variable. (We’re assuming prime remains constant for simplicity sake.)

Now the question becomes, is $409 worth the risk of not having your variable spread locked in for five years.  What risk you say?  Well, about a year ago, variable rates soared as high as prime + 1.50%. That was thanks to the market’s sudden aversion to mortgage lending.

While it’s no longer probable, it is indeed possible that variable rates could once again rise above prime rate.  If, for example, you assign a 1 in 4 chance of variable rates moving to prime + 0.25% or higher in 3 years, then the expected value of the 3-year variable makes it more expensive then the 5-year.

In sum, if you’re looking for a new variable-rate mortgage, you can boil it down to this.

Other things being equal:

  •  
    • If you’re planning to lock your variable into a fixed rate within 3 years, go with the lowest possible variable rate mortgage–as long as it has a 4.25% (or less) fixed conversion rate, as of today.  [Mind you, if this is your plan, it’s worth talking to a mortgage professional about fixed-rate and hybrid mortgage alternatives.]
    • If you plan to let your variable rate ride, consider a 3-year as long as its rate is no worse than 0.10% above the 5-year.  The popular wisdom is that variable rate spreads will be better in 12-36 months.
    • Have your mortgage planner compare 1-year terms against the variable as well.

 

 

 

13 Nov

Start with a plan…..

General

Posted by: Angela Calla

Canadians interested in investing, but who lack a big lump sum to get started, should consider using an automatic savings plan, experts say.

Various financial institutions allow customers to make regularly scheduled investments into a wide variety of products, including mutual funds, registered retirement savings plans, registered education savings plans, tax-free savings accounts and high-interest savings accounts.

Automatic savings plans not only make it convenient for people to become disciplined investors, but those programs offer a slew of other potential benefits such as compound growth and dollar-cost averaging.

Peter Aceto, president and chief executive officer of ING Direct Canada, has used automatic savings programs himself and strongly recommends them to the bank’s clients.

“You are paying yourself first,” Aceto said. “Your lifestyle grows accustomed to saving. It is very, very good

discipline.”

Additionally, the program is easy to use, he said. Clients can choose to contribute on a weekly, biweekly or monthly basis. Next, they pick an amount they can afford and that money is automatically drawn and invested on a regular basis.

For its part, ING Direct offers automatic savings programs for mutual fund accounts, high-interest savings accounts, tax-free savings accounts and RRSPs. Aceto estimates that 30 per cent of the bank’s clients use automatic savings programs.

“We have no minimums because we think that people need to save no matter what,” said Aceto. “Whether it is $10 a month or $10 a week or $50 a month, it is a great way to start.”

Consumers who are shopping around for an automatic savings program should make sure they choose a financial institution that does not require minimums or fees.

The biggest hurdle to getting started, however, appears to be acquiring the initial discipline to invest or save on a regular basis. While it may seem like a daunting challenge, Aceto argues it can involve just simple changes to a person’s daily life.

“Look at what Canadians spend on certain things every day in terms of waste,” he said, noting most people could begin to save just by making coffee at home.

“There are a lot of things that we do during the day that would allow us to save $100 or $200 every month. And having the financial discipline to set up an automatic savings program can really, really force that hand.”

Moreover, building a healthy nest egg through regular contributions is a wise strategy during these difficult economic times. While the Bank of Canada predicts the economy is on the mend, the recovery is considered fragile.

Some economists predict the unemployment rate could continue to rise until mid 2010. Moreover, interest rates could begin increasing from their historic lows by mid next year.

“People who have savings can absorb changes like that a lot better. People who have less debt can absorb changes like that a lot better as well,” said Aceto.

The Bank of Montreal is also a proponent of regular investing and saving. BMO, however, calls its program a “continuous savings plan.”

Emmanuel Hergott, divisional sales leader at BMO Retail Investments, says continuous savings plans can be attached to a variety of accounts, including RRSP, RESP, TFSA and non-registered accounts.

That’s because clients’ long-term goals can be as diverse as saving for retirement, a rainy day, renovations, a wedding or even investing for their children’s education.

“Most Canadians tend to have their paycheques deposited on a bi-weekly basis. So to me, that is the starting point of the conversation,” Hergott said.

There are a number of potential benefits to using a continuous savings plan. They include convenience and compound growth.

Tax-free savings accounts, meanwhile, allow investments and savings to grow tax free. And spreading out RESP contributions is a less painful way to reach the ideal contribution amount of $2,500 per year.

Also, those who make regular RRSP contributions avoid the last-minute rush and panic associated with scrounging up a lump sum or borrowing funds before each year’s deadline. Regular RSP contributors may also have the opportunity to pay less tax during the year, BMO says.

“By notifying Canada Revenue Agency of your regular RSP contributions, you can pay less tax throughout the year instead of waiting for a tax refund,” the bank says on its website.

“Pick up a tax deduction waiver to notify your employer to deduct less income tax from each pay cheque.”

Dollar-cost averaging on certain investments is another possible benefit of regular investing.

“In layman’s terms, dollar cost averaging really works out to doing what we do when we go to the grocery store,” Hergott said, noting it is comparable to buying products on sale. “If they are on sale, I can buy more of them.”

That means when markets are down, an investor can buy more units of an investment vehicle, like mutual funds or stocks, with the same dollars.

Steve Geist, president of CIBC Asset Management, says the earlier a person starts saving and investing, the better.

“Unfortunately, when the opportunity to get started early is right there, it is certainly not top of mind,” he said, adding younger Canadians are often more focused on just living life.

“It is hard to get somebody, who realistically, retirement might be decades down the line, to think about some of these things.”

Younger Canadians, however, should be looking to maximize the benefits of having a longer saving and investing time horizon.

For instance, if a person has a goal to save $500,000 by age 65, the earlier they start, the easier it is to reach that goal.

If a person starts a regular savings program at age 25, he or she will need to save $201 a month to reach that goal – assuming an annual return of 7 per cent. Over that 40-year period, the person’s contributions of $96,480 would have an investment growth of $403,109. That means the total amount of the investment would be $499,589 at age 65.

But if that person waits until they are age 55 to start making regular contributions, he or she would have to save a whopping $2,907 a month (also assuming a 7 per cent annual return) to end up at roughly the same place.

In this case, the client’s contributions of $348,840 would have an investment growth of $151,219 over a 10-year period. That means the total amount of the investment at age 65 would be $500,059. With those examples in mind, Geist says Canadian youth should focus on saving what they can now even if their first jobs don’t come with fat paycheques.

“Twenty years later, while you might make twice the money, you’ll have a mortgage payment and kids and all sorts of things,” he said. “You may have less idle cash in your forties than you do in your twenties.”