Money123: With auto thefts down, are insurance costs next?

‘Buckle up,’ auto insurance expert warns

Signs of easing in Canada’s auto theft problem won’t necessarily translate to better insurance premiums very quickly, one expert told Global News this week.

A new report published by the non-profit Équité Association on Tuesday showed a 17 per cent national decline in auto theft in the first six months of 2024, compared with the same period last year.

But recent improvements in auto theft rates might not prevent auto insurance premiums from rising in the near future, says Adam Mitchell, CEO of Mitch Insurance.

When claims surge, there’s a delay before insurers start to raise premiums on affected consumers’ policies, he explains. 

“It’s okay to get your head around the idea that you didn’t necessarily do anything wrong. The environment changed,” he says. “Buckle up and realize, we’re in this together.”

There are, however, some steps drivers can take in the near-term to protect their car from theft and hopefully get a lower premium in the process.

Read more to find out how to lower the costs of owning your vehicle.

What to expect for next week’s rate decision

Fresh economic data this week has economists and market watchers eagerly awaiting the July 24 interest rate decision from the Bank of Canada, with many now thinking a second consecutive cut is in the cards.

Statistics Canada’s consumer price index (CPI) on Tuesday reported an annual inflation rate of 2.7 per cent in June. That follows a surprise uptick to 2.9 per cent in May.

Heading into the week, Deloitte Canada chief economist Dawn Desjardins says she didn’t have a rate cut in July as part of Deloitte’s “baseline” forecast.

But she says the pair of releases this week — a soft business outlook survey from the Bank of Canada itself and the June CPI report — tilt the odds towards another rate cut next week.

Financial oddsmakers agreed with Desjardins, with bets for a rate cut advancing in money markets after the inflation data came out.

While most economists appear to agree that further easing is warranted, some remain reserved on whether July or September is likely for the next cut.

Read more on how the path for inflation and interest rates might evolve.

The Bank of (Grand)Mom and (Grand)Dad

Monetary support from grandma and grandpa may be common these days, but a new survey suggests many are giving without regard to their own financial needs in retirement.

The “grandparents edition” of RBC’s 2024 Family Finances Poll shows that 21 per cent of those surveyed are supporting at least one adult child financially, while 30 per cent have provided money to their grandkids.

Among those providing support to their kids and their kids’ kids, a majority of respondents (54 per cent) said they are sacrificing their own savings to provide assistance. Some 52 per cent said they have made or would need to make “significant lifestyle changes” to keep up their support.

Some 33 per cent said they’re worried they’ll run out of money themselves trying to cover the costs of their family.

“For those who are already retired and living on a fixed income, these added expenses can pose an immediate risk,” said Craig Bannon, director of RBC’s Financial Planning Centre of Expertise.

But it’s not just grandparents making contributions to home downpayments, if that’s what you’re thinking.

Read more on the daily essentials that older generations are now offering to cover.

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– THE QUESTION –

“My son is struggling with debt, with a student loan and some poor credit card decisions putting him deep in the hole. He’s owned this and wants to pay it down to get back on track. I am debating giving him help here with a $65K loan. But I am nearing retirement age and am barely on track to retire now, scaling back my lifestyle modestly. Is it a bad idea to take out a chunk of money like this now, or will I likely be able to earn it back? I have mostly conservative investments right now. Is there another kind of support I could give that wouldn’t jeopardize my retirement savings as much? I own my home if that’s any consideration. Thank you for your time.”

— A Money123 reader 

“It’s good that your son is owning up to the debt he has created. Although it’s a hard lesson, he does have time to recover and learn from it.

A first step would be for him to create a plan to repay the debt himself. He can use an online debt calculator for this. It will tell him when he will be debt-free and the total amount of interest paid.

Since your son is struggling to make payments, it could be worth setting up a consultation with a Licensed Insolvency Trustee. If he is eligible, a consumer proposal would lower the amount he has to repay and stop ongoing interest charges.

It’s important to ensure your financial security before supporting your son. He has time to recover from his debt, but there is less time for you to rebuild your retirement savings. If you’re uncertain about your capacity to help, a retirement income plan created by a financial planner would give you the clarity you need.

You might also want to involve your son in developing your retirement plan. This can set a good example and show him the importance of planning and being responsible with money.

If a loan for $65K would strain your retirement, you could instead loan him enough to repay the credit card debt. This would save him a lot of interest while still keeping him accountable. The online debt calculator could be used to show the potential savings.

It would be wise to create a formal agreement if you decide to lend him money. This will establish the expectation that the loan will be repaid. Be prepared for the possibility that the loan may never be repaid in full.

Finally, if he isn’t already living at home with you, letting him move back in could help him pay off his debt faster without costing you as much. By doing this, you can support your son while still protecting your financial future.”

– Jason Evans, Certified Financial Planner, Evans Retirement Planning

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