Why Would You Buy This instead of Contributing to an RESP, RRSP, TFSA or Mortgage?

Photo of Stickers of a Stick Family on an SUV Ok, I admit I’m prejudiced. I don’t particularly like the stick figure family decals appearing on cars around town. I think they are a

total waste of money. Within months, the child-sized stickers are the wrong size. The sports have often changed seasons. And I don’t think the person who slapped them on the car has noticed or admired them after the first month they were on. They have become just another part of the car like the advertising on the plastic holder for the licence plate. (Quick test: (If you have one) Exactly what does the advertising on your licence plate holder say?)

Yet those stickers cost money. From what I could see online, they probably cost $3 each or more. For a family of 4 that’s $12.

Put the Money in an RESP Instead
That same $12 stuck in an RESP would instantly become $14.40 because of the 20% Canada Savings Education Grant. And say it was put there 14 years before the child starts university or college. Stick it in at 2.25% per year from GICs. It would be worth $20.35 when the child starts school. Put it in a stock like Bell (BCE) yielding 5.331% and it would be worth $29.79.

That probably doesn’t sound like much. But imagine if every time you almost spent $12 on something you wouldn’t even notice in a month, you put the money into the RESP instead? You could probably buy all the books for first year!

Or Put the Money in an RRSP Instead
Judging by the fact you’re driving a current model of SUV, I’m going to assume you’re not in the lowest Ontario tax bracket. Say, instead, you are paying 31% income taxes. (combined federal and p provincial on a $60,000 income.)

Put the $12 into your RRSP. You’d get a tax refund of about $4. Invest the $12 in your RRSP in Bell (at 5.331%) for 25 years. It would grow to $43.96. Take it out for an after tax value (at 31%) of $30.33.

But wait! There’s more! Invest the $4 tax refund in the TFSA in Bell at 5.331% for 14 years. It would get the CESG to become $4.80. Then it would grow to $9.93.

So in total, you’d have $30.33+$9.93 = $40.26 instead of some shreds of plastic in a landfill somewhere.

Think About How Much Satisfaction Something Will Bring Before You Buy It
I don’t believe in never buying a cup of coffee or only buying day old bread. I understand the need for frivolity and tacky souvenirs and kitsch. I’m just saying think for a few minutes, or preferably a few weeks, before buying something. Will it give you the same pleasure or more years from now? Go for it. But if you think, nah, I’ll probably chuck it in a few months, then resist.

Unless your RESP, RRSP, and TFSA are fully maxed out. If they are, I guess you can afford to dispose of your disposable income.

Don’t Forget the Value of Giving to Charity if You Have Money to Waste
But wait?! If that’s the case, have you considered a donation to charity instead? $12 would buy 3 jars of peanut butter this week at Sobeys. And if you donated it as cash, the food bank could buy food even cheaper than that. And if you give cash, you would get a charity receipt for the $12. That gets you $2.75 off your taxes in Ontario, if it’s the first money you donated this year. But if you’ve already donated $200, it gets you $5.57 off your taxes. So if you donated the $12 to charity, you could buy almost 2 of those stickers for your car with your tax savings. And someone would get to eat!

So Please, Just Think…..

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Are there purchases you wish people would take a few minutes or weeks to consider before they make them? Have you spent good money on something only to wish you hadn’t a month later? Please share your experiences with a comment.

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