The Bank of Canada's recent shift from focusing on interest rates to monitoring recession risk has prompted various demographic groups to adopt specific financial strategies. The advice comes as the bank prepares for a potential economic slowdown, with inflation nearing its desired 2% mark.
Retirees are being advised to secure enough liquid assets in their registered retirement income fund for years' worth of obligatory withdrawals. This could be achieved using high-interest savings products or short-term guaranteed investment certificates (GICs). If a recession causes stocks or equity funds to plummet, these funds should be used instead of selling hard-hit stocks.
For gig workers and new hires, the advice is to create an emergency fund and showcase their value respectively, to counter potential job cuts in an economic slowdown. Individuals burdened by debt are being urged to seek help from non-profit credit counseling agencies before their credit scores suffer irreparable damage.
In light of high-interest rates and a demand-driven surge in vehicle prices, prospective car buyers are advised to delay purchases. GIC investors have the opportunity to lock in returns at the current inflated levels. Investors are also encouraged to rebalance their portfolios, maintaining a 60-40 balance between stocks and bonds, rather than trying to predict market trends.
First-time homeowners are warned to brace for potential property price drops and consider paying down their mortgage rather than investing spare cash, and waiting patiently for the next real estate upturn. Savers are advised to familiarize themselves with deposit insurance protection like that provided by the Canada Deposit Insurance Corp.
The Stress Test podcast provides insightful financial advice for young Canadians navigating this economic climate.
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