The “anti-inflation” deposits of $400 to $600 have started showing up in our bank accounts in recent days. If we took the opportunity to redo the famous marshmallow test with these sums, the results would undoubtedly be fascinating. Failing that, we can always act as if.
You may know the story. Using simple marshmallows, a Stanford University professor conducted a famous study on delayed gratification. The irresistible candy was given to 600 4-year-olds left alone in a room. They could devour it on the spot, or resist 15 minutes and thus obtain a second marshmallow as a reward.
Result: a third of the children had had the wisdom to let their assets grow.
We cannot read the minds of Quebeckers to find out what they plan to do with the amount paid by the government.
What proportion will be eager to spend this heaven-sent money on Amazon? What proportion will choose delayed gratification by saving it or the possibility of amplification by investing it?
Of course, some less well-off households will quickly use the amount received for their basic needs, such as groceries. But many others face a panoply of choices and feel a certain unease at having received such a sum.
As we saw, this week, two MNAs (Michelle Setlakwe, of the Quebec Liberal Party, and Ruba Ghazal, of Quebec solidaire) announced that they would donate their “cheque” to charities in their riding.
If those few hundred dollars that are added to your annual income do not change much in your life, here is an option that can kill two birds with one stone. Not only will you be helping people in need—food banks are particularly hard hit these days by inflation—but you will also receive a tax credit that you can take advantage of in a few months, once your tax return has been submitted. .
The Chair in Taxation and Public Finance at the University of Sherbrooke calculates that a donation of $400 only costs, in reality, $238.52.
And why not treat yourself to a little freedom with the amount paid by the Legault government? If you’re carrying 20% interest debt on a credit card like about a third of Canadians (the average balance is $3,727 according to Equifax), mopping up some of it will leave you with more money in your pocket every the months. The pleasure isn’t immediate, but think of the satisfaction of eating two marshmallows rather than one.
Another way to multiply not the breads, but the gains, is to place the amount received in your RRSP. The tax refund can also be reinvested in the account in the spring. Snowball effect guaranteed!
The RESP, with its attractive grants, is an even better paying option. Ottawa will add 20% and Quebec 10%. No other investment provides a guaranteed return of 30%. If you put $600 in an RESP, the government will add $180 to it.
Labour-sponsored funds, for their part, provide non-refundable tax credits of 30% (from Ottawa and Quebec) on the condition of not being retired. This is in addition to the usual RRSP deduction. Again, we can reinvest what is returned to us so that its anti-inflation payment swells like the price of lettuce and spaghetti.
It’s a small gift that arrives, but you have to make wise choices. If possible, I suggest using the money to create a cushion.
Johanne Leblanc, budget advisor at Option consommateurs
At a time when a recession threatens to cause job losses, this fund may be useful; it may take several weeks for a first EI check to be issued.
Savings can be made in a TFSA or a high-interest account like the one from Épargne Placements Québec, called Flexi-Plus. The amounts are cashable at any time, and the annual rate is currently 3.25%. Also watch the websites of banks that offer promotional rates on new deposits.
With the holiday season upon us, it’s tempting to want to treat yourself and spoil your loved ones. Admittedly, it is not always easy to resist.
To achieve this, you can imitate a little girl who took the marshmallow test in a video produced by the Collegial Center for the Development of Educational Materials. In order not to eat it, she put her hands over her eyes. Not seeing the candy reduced the temptation.
You can do the same thing with the hundreds of dollars received: protect them from your own immediate desires.