BUSINESS

Never buy just
because It’s the
‘right’ thing

for you

to do

BREAKING INTO the housing market might be tough for
some people. But Stephanie and Michael Harrison have

ambitious ideas. ;

They plan to pool their finances
to buy a home, then take in
friends as boarders and tenants.

After all, if you don’t have
enough money yourself, you need
to use creativity and imagination
to achieve your goals. And pian
well uhead — as Stephanie, 11,
and brother Michael, 9, are doing.

“it’s always been a household
rule that both children must put
_ $100 a year from their allowance,
birthday money and so on into
Canadz Savings Bonds,’ said
Marilyn Harrison, who works
part-time for Revenue Canada
. during tax season. ©

“This year, because the kids
now have paper routes, they are
going to. start putting aside $200
into CSBs every year.’"" So far,
each child has more than $2,000.

_ “The children joke that they are
going to use their CSBs to buy
their own ‘place so they can move
out,”’ Harrison said.

Fall is bringing us into the an-
nual Canada Savings Bond cam-
paign once again — pre-empted
this year by B.C. Savings Bonds,
which are already on sale paying a
minimum 5%. for their three-year
term.

Many of the characteristics of
‘the two. bonds are similar — as
are the reasons for buying, or not
buyiag, thera.

-The record of $53.8 billion
-CSBs: held in- 1987 — thanks to

- the stock market crash which -

produced record sales of $17.4
billion that year.— has fallen to
$33.9 billion today.

And CSBs certainly aren’t the
only or even the most important
‘way to save or: hold money. But
obviously thousands of Canadians
. still like to buy the bonds.’

‘Back to the world of housing,
Margaret Bergdal, a 46-year-old
teacher, used 540,000 of her CSBs
this year plus the equity in the
home she solid to buy a $291,000
‘house for cash.

“} buy the bonds every year
because it’s an easy way to save
money, and I like knowing the
money is there in a safe, liquid
form,’’ she said.

Besides the traditions of buying
CSBs, their safety and liquidity
appeai to individuals. They can be
a good way to hold money for an
emergency or opportunity. And
the discipline of an automatic
payroll deduction offers one of
the better forced savings plans
(remember to deduct the interest
you pay).

Yet you should never
automatically buy CSBs or BCSBs
because it appears the ‘“‘right’’
thing to do.

Review all the alternatives and
buy the bonds only if it’s the
“right” thing for your personal
and financial situation at this
time. Some of the alternatives:

e@ Delete your debt. Work out
how much tax you pay on the
bond interest. In almost every
case, this after-tax interest you
receive is far less than the interest
you pay on outstanding credit

Michael
Grenby

DOLLARS AND SENSE

card balances, loans and mort-

gages.
e@ Consider the competition..

Many financial institutions come
out with instruments similar to the
bonds — and often pay a slightly
higher rate. Just be sure you stay
within deposit insurance limits.

e@ Remember the RRSP. Putting
money into a registered retirement
savings plan allows you to save
tax now and shelter the growth
inside your plan from tax. Of
course, you can put the bond into
a (self-directed) RRSP and enjoy
the same benefit; try to find a
plan with low or no fees.

@ Go for growth. As their name

implies, bonds are for saving

rather than investing.

After you account for income
tax and inflation, what’s left of
the bond interest will rarely make
you wealthy.

If you can develop the expertise
and tolerate more risk, consider
putting some money into the stock
market, revenue property or a
business.

The 1985 Series 40 CSBs mature
Nov. 1 with about $4 billion out-
standing. If you bought 2 $1,000
compound interest pond, for ex-
ataple, you will receive $1,862.39.

You should have been declaring
the interest either annually or

“every three years. (Note if you

buy a compound bond now, you
must declare future interest an-
nually.) So remember to deduct
what you have already declared
and report only the balance.

If you haven’t been reporting
the interest, you are supposed to
report only one year’s interest for
1992 and ask Revenue Canada to
reassess your past returns — either
annually or tri-annually from
1986 through 1991.

Make sure you cash your Series
40 CSBs Nov. 2 (Nov. I falls on
Sunday). After maturity, they
don’t pay any more interest.

— Copyright 1992

Mike Grenby is a North
Shore-based columnist and in-
dependent financial adviser who
works with individuals; he will
answer your questions as space
allows — write to him c/o The
North Shore News, 1139 Lonsdale
Ave., North Vancouver V7M
2H4.

Wednesday, September 23, 1992 - North Shore News - 43

“p c.’ S our h r e,

ike many British Columbians,
our parents came here with
very little, and worked hard to
build a better future. We want to

do the same for our kids.
So we’re buying B.C.
Savings Bonds.

They’re an ideal way for us
to build a nest egg, because

they offer a competitive rate of .
return. And they’re secure —
guaranteed by the Province of B.C.

Best of all, the money stays right
here in the province to help with

invest in Your Future.

buyin
gs Bonds.” ”

projects like schools sad hesadh .
services. So only B.C. residents or. -
businesses can buy them.

You can get B.C. Savings Bonds at
participating banks, credit
unions, trust. companies,
investment. dealeys ‘and -
Government. Agents.
They’re easy to buy,
and the terms are flexi-

ble and convenient. ;

We’ve got a good reason ‘to invest

in B.C., and buying B.C. Savings

Bonds makes more sense

than ever.

Eepritish
olumbia