Most powerful tool in your financial toolkit: a budget

What is a budget?

A budget is a plan that helps you manage your money and avoid getting into financial trouble. It lists all of your income and expenses, and gives you a snapshot of your financial situation.

6 reasons why a budget is your most powerful tool

  1. Allows you to stay on track – a budget helps you track money coming in and going out.
  2. Reduces stress – if you manage money and credit wisely, you can avoid financial surprises.
  3. Helps you identify what is important – a budget helps you distinguish between needs and wants.
  4. Avoid debt – create a budget, you are more likely to follow it and avoid unwanted debt.
  5. Save for tomorrow – a budget helps you plan and save for an important financial goal, like your children’s education or an every day goal like a new appliance.
  6. Be ready for surprise expenses – a budget helps you plan ahead and put money aside for emergencies or unexpected expenses.

Easy steps to make a budget:

To help you get started, use the Financial Consumer Agency of Canada’s budget calculator.

  • Get organized – Record all of your expenses so you know where your money goes and where you can cut spending.
  • Identify your short-term and long-term goals, and build saving for them into your budget.
  • Divide your expenses between things you need (e.g. groceries) and things you want (e.g. tickets to a concert)
  • Make “being debt-free” one of your goals – List all of your debts with interest rates and track your progress in paying them off.
  • Pay more than the minimum payment on bills whenever you can
  • Stick to your plan – Learning to stick to a budget can seem difficult at first, but the more you use your budget, the easier it becomes.

Managing Money and Debt Wisely: It Pays to Know!

Find helpful tools and resources at

Start teaching your children about money when they are young. This way, they will learn how to:

Canadian and international organizations are working to identify the types of financial knowledge, skills and behaviours children should learn at different ages.

“As more financial decisions are faced by Canadians at younger and younger ages, grasping financial principles early in life is crucial to being better prepared to participate in the Canadian and global economy and avoiding pitfalls in financial decision making.”

Here are some financial concepts you can discuss with your children as they grow up. For example, help your children learn to:

Ages 4 to 8:

  • understand that people have a limited amount of money to spend
  • use money to buy basic goods and services for simple transactions
  • divide allowances or other money received among the financial goals of saving, spending and sharing
  • understand that there are choices when it comes to money, and that money spent on one thing means that there is less money available for something else.

Ages 9 to 14:

  • recognize the difference between needs and wants
  • understand the importance of saving a portion (for example, 10 percent) of all money they receive and the value of an emergency fund
  • create a savings plan for short-term and long-term financial goals
  • identify regular financial commitments families have and know that families use household income to meet those commitments
  • create a simple budget for an activity or event.

Ages 15 to 18:

  • understand the pros and cons of different payment options such as cash, debit cards and credit cards
  • understand different kinds of basic investments (GICs, stocks, bonds and mutual funds)
  • understand the time-value of money (for example, past, present and future worth of money) and opportunity costs
  • understand the concept of “living within your means” and why it is important.

Getting started

Put your children on the path to financial success and smart decision-making by starting early. You can help them gradually take responsibility for their own financial well-being.

Here are a few tips to help you get started:

  • Talk about money when your children are around so that they become familiar with financial terms and concepts.
  • Start out easy. With young children, it’s best to start with very basic concepts, such as counting and learning to identify the value of different coins and bills.
  • Build on the basics. As your child grows older, introduce more advanced concepts such as needs versus wants, budgeting, and income and expenses. Learning about finances at a young age will help your child have a better understanding of more complicated financial products in the future, such as credit cards, loans and investments.
  • Look for teachable moments. Running errands and visiting stores are opportunities to teach your children about money and involve them in the buying process. For example, check for weekly in-store specials or go through flyers together to look for coupons for items on your shopping list. Check the cost of similar products made by different brands and discuss the differences.
Teaching children money skills with an allowance

Giving your child an allowance can be a good way to teach basic money management skills. It can also promote good decisions about spending and saving.

It is up to you to decide whether or not to give your child an allowance. Make your decision based on what you think is best for your child and your situation.

If you decide to give your child an allowance

  • Decide on the amount. Only give an amount you are comfortable with and can afford. The amount itself is less important than the overall goal: teaching your child the basics of money management.

    Choose an amount that is appropriate for your child’s age. Consider starting with a small amount as soon as your child is old enough to understand the connection between money and purchases. Talk with other parents and find out how much they are giving.

    For example, a young child could receive $1.00 per week, which you can increase as he or she gets older.

  • Decide whether it should be earned or given. Some families believe that children learn the value of work and how to earn money by doing something and getting paid for it.

    Others prefer not to link allowance to chores and prefer to use it mainly as a tool for teaching financial habits and values.

    Both options have pros and cons, so you will need to decide what is best for your family.

  • Be clear. If the allowance is linked to chores, make sure your children know what chores they are doing for pay and what is expected for simply being part of a family.
  • Be consistent. Try to give the money to your child on the same day every week. This allows your child to plan so that he or she can learn to budget and save for future expenses.
Building basic money skills for children

Needs versus wants

Understanding the difference between needs and wants is the foundation of good money management skills.

  • Needs: Explain to your child that the income you receive must first be used to pay for basic needs such as housing, food and clothing for the entire family.
  • Wants: Other expenses, such as restaurant meals and family vacations, are wants, and can only be paid for if there is enough money left after paying for your family’s needs.

Knowing the difference between needs and wants will help your child understand:

  • that they must learn how to live within their means
  • that they cannot spend all of their money only on the things they want
  • the importance of saving for the things they want.

Set a good example

Children learn a lot by watching and imitating their parents. By modelling good spending and saving behaviour, you will encourage your children to pick up your good financial habits. To show them how to manage money responsibly:

  • try not to buy things unless you can afford them
  • explain how you are planning to pay or save for major purchases or activities
  • talk to your children about saving and budgeting.

Practise everyday financial literacy

Everyday activities can be used to provide practical lessons in money management. When you are out shopping or running errands, talk about the products you are about to buy. For example:

  • How do you decide which products to buy?
  • Why did you buy, or not buy, the sale item?
  • Why might you want to buy an item individually or buy it in bulk?

Talk about where money comes from

For many children, debit cards and automated banking machines (ABMs) may seem like unlimited sources of cash.

Key points to discuss:

  • Debit cards and ABMs are not sources of free money. Your debit card is linked to your chequing or savings account. The debit card allows you to pay for a purchase or withdraw some of the money in the account from an ABM.
  • The money supply is limited. There is only so much money in your account. This money comes from income you receive from your employer, from social benefits such as the Canada Child Tax Benefit or other sources.

    If your children are old enough to understand, show them your online banking transactions. Point out how cash withdrawals and debit card purchases reduce the balance in your account.

  • Think before you act. Before your children spend their money, encourage them to think about the effect the purchase will have on their savings goals. Try using a visual aid such as a coloured chart to track spending for things like treats or downloadable songs.

    They can use another chart to mark progress made towards savings goals.

As the Feb. 29 deadline for contributions looms, here are five things to know about RRSPs:

They allow you to defer taxes, not avoid them. You are able to deduct your contributions from your income, but when you withdraw the money in retirement, you will pay income tax.

Your unused RRSP contribution room carries forward. If you don’t maximize your contribution for a given year, the unused portion carries forward.

If you have a pension plan at work, that can reduce your RRSP contribution room. Depending on how generous your pension plan is, the amount you are able to contribute to your RRSP may be substantially reduced.

Choosing between saving for retirement using your RRSP or tax-free savings account depends on the tax bracket you are in today and where you expect to be when you start withdrawing money from your RRSP.

You can withdraw money from your RRSP under the home buyers’ plan and the lifelong learning plan, but if you do you must repay the money to your account within a set amount of time. It is generally 15 years under the home buyers’ plan, while under the lifelong learning plan it is generally 10 years.


A few tips

Here are tips on managing your money wisely inside or outside of your RRSP:

  • Be clear about your financial goals and have a financial plan that shows the rate of return and therefore the best asset mix to achieve your goals.
  • Be diversified, address all the risks, and take no more risk than necessary to achieve your goals.
  • Don’t try to beat the experts by picking the best individual stocks. Use exchange-traded funds or professional money managers.
  • Keep it simple.
  • Be efficient from an income tax point of view.
  • Know what fees you are paying.
  • Insist on a report that shows performance compared to the proper benchmarks.

Know how to recognize a scam

There are many fraud types, including new ones invented daily.

Taxpayers should be vigilant when they receive, either by telephone, mail, text message or email, a fraudulent communication that claims to be from the Canada Revenue Agency (CRA) requesting personal information such as a social insurance number, credit card number, bank account number, or passport number.

These scams may insist that this personal information is needed so that the taxpayer can receive a refund or a benefit payment. Cases of fraudulent communication could also involve threatening or coercive language to scare individuals into paying fictitious debt to the CRA. Other communications urge taxpayers to visit a fake CRA website where the taxpayer is then asked to verify their identity by entering personal information. These are scams and taxpayers should never respond to these fraudulent communications or click on any of the links provided.

To identify communications not from the CRA, be aware of these guidelines.

If you receive a call saying you owe money to the CRA, you can call us or check My Account to be sure.

If you have signed up for online mail (available through My Account, My Business Account, and Represent a Client), the CRA will do the following:

  • send a registration confirmation email to the address you provided for online mail service for an individual or a business; and
  • send an email to the address you provided to notify you when new online mail is available to view in the CRA’s secure online services portal.

The CRA will not do the following:

  • send email with a link and ask you to divulge personal or financial information;


If you call the CRA to request a form or a link for specific information, a CRA agent will forward the information you are requesting to your email during the telephone call. This is the only circumstance in which the CRA will send an email containing links.

  • ask for personal information of any kind by email or text message.
  • request payments by prepaid credit cards.
  • give taxpayer information to another person, unless formal authorization is provided by the taxpayer.
  • leave personal information on an answering machine.

When in doubt, ask yourself the following:

  • Did I sign up to receive online mail through My Account, My Business Account, or Represent a Client?
  • Did I provide my email address on my income tax and benefit return to receive mail online?
  • Am I expecting more money from the CRA?
  • Does this sound too good to be true?
  • Is the requester asking for information I would not provide in my tax return?
  • Is the requester asking for information I know the CRA already has on file for me?

If you do have a debt with the CRA and can’t pay in full, take action right away. For more information, go to When you owe money – collections at the CRA.

How to protect yourself from identity theft

  • Never provide personal information through the Internet or by email. The CRA does not ask you to provide personal information by email.
  • Be suspicious if you are ever asked to pay taxes or fees to the CRA on lottery or sweepstakes winnings. You do not have to pay taxes or fees on these types of winnings. These requests are scams.
  • Keep your access codes, user ID, passwords, and PINs secret.
  • Keep your address current with all government departments and agencies.
  • Choose your tax preparer carefully! Make sure you choose someone you trust and check their references. Always review your return, agree with the content before filing, and follow up to make sure you receive your notice of assessment, since it contains important financial and personal information that belongs to you.
  • Before supporting any charity, use the CRA website at to find out if the charity is registered and get more information on the way it does business.
  • Be careful before you click on links in any email you receive. Some criminals may be using a technique known as phishing to steal your personal information when you click on the link.
  • Caller ID is a useful function. However, the information displayed can be altered by criminals. Never use only the displayed information to confirm the identity of the caller whether it be an individual, a company or a government entity.
  • Protect your social insurance number. Don’t use it as a piece of ID and never reveal it to anyone unless you are certain the person asking for it is legally entitled to that information. If an organization asks for your social insurance number, ask if it is legally required to collect it, and if not, offer other forms of ID.
  • Pay attention to your billing cycle and ask about any missing account statements or suspicious transactions.
  • Shred unwanted documents or store them in a secure place. Make sure that documents with your name and SIN are secure.
  • Immediately report lost or stolen credit or debit cards.
  • Carry only the ID you need.
  • Do not write down any passwords or carry them with you.
  • Ask a trusted neighbour to pick up your mail when you are away or ask that a hold be placed on delivery.

Have you been a victim?

You should report deceptive telemarketing to the Canadian Anti-Fraud Centre online or by calling 1-888-495-8501.

If you suspect you may be the victim of fraud or have been tricked into giving personal or financial information, contact your local police service.

If the CRA has confirmed that a taxpayer’s information has been compromised, the Agency will act to prevent the fraudulent use of the information involving systems and processes for which the CRA is responsible.

If your social insurance number (SIN) has been stolen, you should contact Service Canada at 1-800-206-7218. For more information, see Social Insurance Number (Service Canada website).

You can ask the CRA to disable online access to your information on the CRA login services by calling the e-Services Helpdesk. After access to your information is disabled, you may change your mind and want access again. If so, you can call the e-Services Helpdesk and ask that your access be re-activated.

If you think your CRA user ID or the password you use in personal dealings with the CRA has been compromised, contact our e-Services Helpdesk.


Examples of fraudulent communications