Paying for Life's Firsts
The recently released TD Canada Trust Report on Savings found that when it comes to weddings, the first home, a car and children, we are fine with taking on debt.
The numbers aren't really all that surprising considering our debt load. According to the report, 61 per cent of us are comfortable taking on debt when it comes to financing a down payment on a home. Fifty-seven per cent of us take on debt for the first car, 54 per cent for schooling, 46 per cent for starting a family and 38 per cent take on debt for a wedding and honeymoon.
All of these are lovely to have but we're putting ourselves into debt for them and we're not saving. The report also found that 40 per cent of Canadians find it difficult to save so they rely on credit.
Take a look the graphic on the right for an idea of average costs for all these 'firsts.'
The First Car
The average cost of a car is $33,000. While you can finance the entire purchase price of the car, if you save an average of 20 per cent, that can lower your monthly payments. Remember, that's just the car payment, not the other necessities like gas and insurance. Do you really need a car with an average price of $33,000? Take a moment to really decide. You can buy a car for a lot less.
It is a special day but $20,000 is a lot of money. You can save for it but there are ways of having your big day for a lot less money.
Buying your first home can be terrifying especially when you see how much money you're borrowing. Yet some Canadians are willing to finance their down payment via a line of credit. Kevin Moffat, Vice President, TD Canada recommends that a down payment come from savings, not from a source of credit.
There are ways to save for a down payment. You can put aside a set amount every month and as a first time homeowner, you can borrow money from your RRSP without penalty. You do have to pay it back, of course.
As always, it's about deciding what you want, when you want it, how much you're willing to pay for it and how you're going to save for it.