Monday, November 7, 2011

Maximizing the Value of Birthday Money

It's unavoidable: birthday money. No matter how old or how successful I get, there are a handful of elders in my family who insist on celebrating the passing of another year by putting a cheque in a card and sending it to me for my birthday. Not that I'm complaining. But what should an adult do with a birthday cheque or any other kind of "found money"? How should it best be spent? Or should it be spent at all?

Five ways to maximize the value of birthday money
  1. Pay down your credit card or line of credit. Even twenty-five dollars from your auntie in Halifax can add up to more than a few cents of savings on interest payments.
  2. If you have contribution room in your TFSA, put it in there and let it grow tax free.
  3. Put it in your emergency account. You can never really have too much money on hand in case life goes sideways.
  4. Put it towards something big that you are saving for.
  5. At the very least, cash the cheque and put the money in a coffee can under your bed for a rainy day.
In August, I had a guest business coach on Money Moment, Doug Turner, who talked about saving money forever, not just for a rainy day. Doug's radical suggestion seems particularly relevant when it comes to passive income such as money that just drops into my mailbox on my birthday. After all, I didn't lift a finger to earn that money and so, it seems, that one of the easiest ways to show respect for a cash gift is to maximize its value and, if I don't have debt to pay down, then I should sock it away...maybe forever.

And, just in case you have a rich uncle who likes to write big, fat birthday cheques, breathe easy. In Canada there is no income tax on cash gifts unless the recipient is your spouse or minor child.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact moneyme at telus dot net.

2 comments:

  1. oh yes, I forgot to say ....HAPPY BIRTHDAY!!!

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  2. I will try again to post my blog.....another way to say "save money forever" perhaps to say we save some money to "spend" later, and we save a separate amount of money to "use" later, to make money with it, by investing for example. Investing doesn't count as spending, even though we might buy something, like an income property for example. You can even borrow for this purpose and it still doesn't count as spending!! How cool is that?? The problem is that most people never start so they don't accumulate any money to make money for them. Kids, however, can start doing this at a very early age.

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