By Sheryl Smolkin

Going to school after high school can be costly.

A student attending trade school, college, CEGEP or university full-time today can expect to pay between $2,500 and $6,500 per year—or more—in tuition. Books, supplies, student fees, transportation, housing and other expenses will only add to that total.

In fact, full-time students in Canada paid an average of $16,600 for post-secondary schooling in 2014–2015. That is more than $66,000 for a four-year program.

If you are saving for your children’s post-secondary education, give yourself a pat on the back. Canadian parents are ahead of their counterparts in other Western nations in saving for their children’s post-secondary education.

Close to three-quarters (72%) of Canadian parents are saving for their children’s post-secondary education, putting them ahead of parents in the U.S. (65%), Australia (53%) and the U.K. (46%), according to The value of education: foundations for the future report, which includes responses from parents in 15 countries and territories.

However, only 30% of Canadian parents are funding their children’s university or college education through a savings plan specifically for education. Almost one-quarter (22%) are taking that funding from general savings, investments or insurance policies and 66% are using their day-to-day income to get their kids through school.

RESP
That’s a shame because by saving in a registered educational savings plan you are eligible for the Canada Education Savings Grant and the growth in the fund can be tax-sheltered until the student eventually withdraws money for school expenses when he/she is likely to be earning less than you are now.

Employment and Social Development Canada pays a basic CESG of 20% of annual contributions you make to all eligible RESPs for a qualifying child to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.

ESDC will also pay an additional CESG amount for each qualifying beneficiary. The additional amount is based on net family income and can change over time as net family income changes.

For 2015, the additional CESG rate on the first $500 contributed to an RESP for a beneficiary who is a child under 18 years of age is:

• 40% (extra 20% on the first $500), if the child’s family has qualifying net income for the year of $44,701 or less; or
• 30% (extra 10% on the first $500), if the child’s family has qualifying net income for the year that is more than $44,701 but is less than $89,401.

Unused CESG contribution room is carried forward and used when RESP contributions are made in future years provided that the specific contribution requirements for beneficiaries who attain 16 or 17 years of age are met.

Impact on your retirement
Given the increasing cost of post-secondary education it is not surprising that many Canadian parents are also concerned about how their children’s educational costs will affect their own finances, with 43% worrying about the cost and 31% concerned about how paying that expense will affect their other financial commitments. If their financial situation becomes difficult, many parents’ long-term savings and retirement plans may be in jeopardy.

Exactly half of Canadian parents believe funding their children’s schooling is more important than contributing to long-term savings and investments and 43% state that they prioritize their children’s post-secondary educational expenses over saving for retirement. More than half (54%) said they would be willing to go into debt in order to afford university or college expenses.

In addition, survey results reveal that Canadian parents are thinking about these expenses early in their children’s lives as 28% of parents start planning ways to fund these expenses when the child is born; 9% before the child is born; and 24% look at these issues before their child begins primary school.

Even so, half of Canadian parents expect their child to contribute financially toward those educational expenses and 39% say their university-aged children are helping to fund their own education, which is one of the largest proportions of all of the markets surveyed, the study notes.

To estimate your child’s future education costs and see how your planned RESP including contributions and grants will cover those costs, plug some numbers into the GetSmarterAboutMoney.ca RESP Savings Calculator.

By Sheryl Smolkin

My husband and I helped our daughter buy her first house and a few years ago we bought my son a car. We also partially paid for their education so they were able to graduate debt free. I consider these gifts as an excellent investment because we could afford it and it was our pleasure to share our good fortune with them when they needed it most.

So when I came across Sean Cooper’s blog Why Millennials Should Save Their Down Payment and Not Rely on the Bank of Mom and Dad, I figured I’d better find out what he has to say. Sean believes that parents who cough up all or part of the down payment for a house are generally hurting their offspring instead of helping them. “By showing your millennial child tough love, you’re teaching your kids a valuable lesson: not everything in life is handed to you in a silver platter,” he says.

In an excerpt from his book The Bank of Mom and Dad: Money, Parents, and Grown Children published in the Globe and Mail last year, Derrick Penner says the first question the family should explore is whether the timing is right. For young adults just setting out on a new career, it might be more logical to rent (assuming they’ll also be able to save some money) and kick-start an investment plan that would lead to home ownership later than to buy real estate before they’re really ready.

But if you do decide to give cash to your kids for a down payment, How to help your kids buy a home by Michele Lerner on Bankrate.com has some great tips. First and foremost, she says make sure your own retirement needs are adequately funded before you part with a large lump sum. Also, if you co-sign on a mortgage or loan, understand that you will be liable if your child defaults, so make sure in a worst case scenario you can also afford to make the mortgage payments.

Help your child buy his/her first home, a post on GetSmarterAboutMoney.ca says if you do decide to go ahead, there are three common options: loan your child the money; co-sign your child’s mortgage; or pay some or all of the costs as a gift. Make sure you understand the pros and cons of each option, and how your tax situation and financial plan could be affected.

And finally, an article last year by Adam Mayers in the Toronto Star correctly notes that Emotions can run high when helping the kids buy a house. He says that if family-financing is in the home-buying cards for the younger generation, some issues to consider are: securing any loan via promissory note or against title; the pros and cons of joint ownership; and, how to get your money back. In a mini-poll in the article 68% of those who voted said they would be willing help their kids with a down payment for a home.

*****

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

A pair of surveys recently released by Tangerine Bank and TD Bank show that many millennials started saving for retirement in their early 20s, but they do not have a clear understanding of how much to save or how their RRSP savings can be used in future.

A new survey by Tangerine found that the younger generation of Canadians is getting the message to start saving early and build a nest egg for retirement. Despite being in the early stages of their career or still in school, the survey revealed that 62% of millennials (those 18-34) have started saving for retirement and almost half (46%) said they started before the age of 25.

These results are even more impressive when compared to data collected from the 81% of older working Canadians aged 35-65 who are currently saving for retirement. When asked when they began saving, only 18% reported to have started before the age of 25.

Of those 38% of millennials not yet saving for retirement, many (62%) say it’s because of their low salary or not having enough money, and another 23% said it’s because they are saving for a big ticket item like a house, a wedding, or travel.

Nevertheless across the different age groups, the survey’s findings were uniform when it comes to financial literacy. Fifty eight percent of both millennials and older working Canadians felt they did not learn enough about saving for retirement before they started.

This is consistent with the findings of a late 2015 Environics poll conducted for TD bank which found that many millennials are unaware that RRSP funds cannot be used for other items such as making a charitable donation (64%), paying childcare expenses (60%), financing a car (52%), making a personal loan (51%), renting an apartment or purchasing a second home (50%).

Half (50%) of all millennials surveyed by TD correctly identified that RRSP funds can be used for first time home purchase, although just 28% were aware they can be used to fund full-time education as a mature student.

“Saving enough money for a down payment on a home can be difficult for many younger Canadians, so the ability to withdraw up to $25,000 from an RRSP, or up to $50,000 for a couple, can help make it easier,” said Linda MacKay, Senior Vice President, Personal Savings and Investing at TD Canada Trust. “Building up an RRSP from the earliest possible moment not only helps you save on income tax now, but could also help get you into your first home more quickly and lower your monthly mortgage payments down the road.”

But Lee Bennett, Senior Vice President, TD Wealth Financial Planning says there are pros and cons and long-term implications of using RRSP funds to buy a home or pursue further education, including giving up the potential growth of RRSP savings until that money is repaid into the plan. As with any significant investment decision, she recommends investors consult with a financial planner who can help explain what’s best for each individual.

MacKay agrees, adding that it’s important to have a bit of know-how and understand clearly what an RRSP can – and cannot – be used for in order to avoid incurring tax penalties for improper withdrawals and to be able to maximize the amount of money that can be saved. She says this applies particularly to millennials who, as the TD survey shows, have many misconceptions about how an RRSP fund can be used.

You can find basic information on How RRSPs work and Making RRSP withdrawals before you retire on the Ontario Securities Commission’s web site GetSmarterAboutMoney.ca and a more comprehensive discussion from the Canada Revenue Agency at RRSPs and related plans.

By Sheryl Smolkin

And before you know it it’s almost the middle of August. I haven’t seen any coloured leaves drifting down…yet. But already the days are getting shorter. This week we feature interesting blogs from top bloggers who kept on writing even when many of us were on vacation.

In GetSmarterAboutMoney.ca, Caroline Cakebread shares 5 ways to tap your home for cash in retirement. They are: sell and rent; sell and downsize; become a landlord; rent out your home  temporarily; and, get a reverse mortgage.

If you are in your 50s and starting to get really serious about planning your retirement, take a look at Rich at any age: In your 50s by David Aston, Romana King and Julie Cazzin on MoneySense. They suggest that you get a ballpark figure of what you will need; max out your savings; and then, pick the right moment.

Are you still agonizing over whether it makes more sense to save in an RRSP or a TFSA? Then take a look at RRSP Myth – Retirement Income Has To Be Lower For RRSP Benefit by Mike Holman on MoneySmart. He gives interesting examples to illustrate that even where income in retirement is a bit higher than in the earning years, RRSPs will likely still save you some taxes or at worst – won’t save you any tax, but won’t cost you anything either.

Mr. CBB gives advice to a couple with $5,000/month of discretionary income on Canadian Budget Binder about buying their first home. He says they should talk to a financial advisor about retirement savings and life insurance; figure out the size of mortgage they can afford on one income; factor in home maintenance costs before they buy; and understand how to be prepared for emergencies.

Dan Bortolotti writes on Canadian Couch Potato about Calculating Your Portfolio’s Rate of Return. Rate of return calculations fall into two general categories: time-weighted and money-weighted. If a portfolio has no cash flows (that is, the investor makes no contributions and no withdrawals), both methods produce identical figures. He says the key point to understand, therefore, is that any differences in reported returns come about as a result of cash inflows and outflows.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

Spring has definitely sprung in our neck of the woods and yesterday I woke up to a neighbourhood of happy smiling people wbiking, jogging and cleaning garages.

This week we feature a blog from Blonde on a Budget Cait Flanders who is nine months into her shopping ban. Of course, as she notes in Nine Months Without Shopping and Takeout Coffee, she gets to make up the rules as she goes along. So she discarded a ripped pair of jeans and replaced them. She also broke her “no take out coffee” ban a few times when she was out with friends. Nevertheless, she has upped her savings goal from $100/month at the beginning of the period to $250/month and she has a nice little nest egg to show for it.

On Boomer & Echo, Robb Engen writes about how we can always find joy in the smallest things like using a cash back credit card for his everyday purchases. I know what he means. I prefer my travel rewards credit cards, but it feels great when I accumulate enough points at Shoppers Drug Mart or Longo’s and the cashier asks me if I want to take $20 or $30 off my bill.

Sean Cooper writes on Retire Happy about three More Costly Pension Mistakes and How to Avoid Them. They are: not updating your spouse and beneficiary designations; not joining your company pension plan right away; and, not starting your pension as soon as you are entitled to a unreduced pension.

The question that every person who is saving for retirement struggles with is Will they run short in Retirement? As part of the Masters of Money series on GetSmarterAboutMoney.ca, Allison Griffiths acknowledges that few working people have any idea how much money they will need and she offers an approach to budgeting that can help them nail down these elusive numbers.

Spring is the time when new university and college graduates hit the street looking for their first career position. On stupidcents.com blogger Tom Drake discusses best careers for the future. With baby boomers aging in the next 20 years, he says those who are involved in health care such as dental hygienists, registered nurses and physical therapy assistants will be in demand. But software developers and construction equipment operators are also growth areas.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

 

By Sheryl Smolkin

It was dark when I got up this morning and it won’t be long before it will also be dark before the end of the work day. So let’s shine a light on some interesting topics tackled by personal finance bloggers last week.

For most of your working life you’ve saved for retirement. But as that date nears, your focus shifts to using your savings to pay for life after work. Take a look at my blog What happens to my pension when I retire? on Brighter Life to find out how the money can be paid out when you retire.

GetSmarterAboutMoney.ca has a quiz that will help you build your retirement lifestyle profile — an analysis combining the range of income you’ll need and the level of readiness you’re at today.

In July, on Million Dollar Journey, Frugal Trader published his Canadian Online Discount Stock Brokerage Comparison, 2014. He mentions a number of major (cheap) discount brokerages in Canada including: E-Trade (now i-trade), Virtual Brokers, Qtrade, Interactive Brokers, and Questrade (voted #1 by Million Dollar Journey Readers).

Retire Happy blogger Sarah Milton discusses how to deal with the challenges of dating when you are trying to pay down debt and get your financial house in order. She says miscommunication can create a great deal of stress and tension.

And Retired Syd (Retirement: A full time job) writes about Her Short Career as a Landlord when after extensive preparations to rent out her vacation property in Napa she decided the small amount of money she would net was not worth the aggravation.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

I’m back at my desk after a week in Orlando with my daughter’s family, including our two year old granddaughter. While Disney and pool time were lots of fun, I’m not sorry to return to late summer weather in Canada. In my book, clear skies and 20 degrees is as good as it gets.

As the new the business year kicks off,  Best from the Blogosphere gets back to some retirement basics. How much do you need to retire? When can you afford to retire? Where do you want to retire?

In How much you need to save for retirement,  GetSmarterAboutMoney.ca says how much you need to retire depends on your age, your lifestyle and the amounts you will receive from government benefits. There is a useful link to a calculator from Service Canada to estimate your income in retirement and seven tips for last minute savers.

While the best known vehicles for retirement savings are Registered Retirement Savings Plans and defined contribution plans like the Saskatchewan Pension Plan, for the last five years Canadians over18 have also been able to open tax free savings accounts.  My Own Advisor’s Mark Seed reminds us of some of the very best things about the TFSA.

Many people have been diligent about saving and accumulated significant amounts, but they are still apprehensive about retiring and dipping into their savings. Boomer & Echo’s Marie Engen answers the question Can I afford to retire? for one couple. She says their challenge is to shift from savings and asset gathering mode to spending mode  — something even the greatest savers have the most trouble doing.  As a result, they may needlessly deny themselves a pleasurable retirement.

Donna McCaw says on Retire Happy that delayed retirement is a retirement plan. In other words, larger numbers of Canadians are choosing to work longer because they like their jobs or they need the money. She quotes D. Banda of the American Association of Retired persons who claims, “Older workers are changing the workplace to an extent women did 30 years ago when they started entering the force in greater numbers.”

And finally, where you retire can have a significant impact on both your finances and quality of life. In his MoneySense blog Financial Independence, Jonathan Chevreau says you should test out the retirement lifestyle in your community to ensure it is a good fit. He concludes that where he lives in Long Branch, Ontario meant an hour commute each way when he worked in downtown Toronto, but it’s a perfect retirement haven.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

There is lots of good reading this week from some of our favourite bloggers.

On retirehappy.ca, Scott Wallace reminds us why RRSPs should not be viewed as short-term savings accounts. Saving for retirement is hard. It requires sacrifice, long term vision and discipline. Short term gratification can be the ‘Achilles Heel’ for anyone’s RRSP portfolio.

If you have a defined benefit pension plan, you may think you don’t have to worry about additional retirement saving. But on boomer & echo, Robb Engen says he is saving outside his DB plan because there is no guarantee he will work for the same employer for the next 20 years. Furthermore, in the current economy, layoffs are always a possibility, even at educational institutions.

Another reason to accumulate additional retirement savings is to have a nest egg to spend on healthcare later in life. Canadians are proud of their healthcare system, but on Brighterlife.ca Kevin Press reports on the results of the 2013 Sun Life Canadian Health Index^TM. The study reveals that among Canadians who have received a serious health diagnosis, or who have had a bad accident, 40% said the experience caused them some degree of “financial hardship.”

For some people, saving for retirement is only the first hurdle to overcome. Then they have to figure out when to actually cut their ties with the world of work and take a leap into the world beyond. Tim Stubbs says on Canadian Dream: Free at 45 that fear of the unknown is natural, but you can do a little fear testing by playing the game: what’s the worst that can happen?

And finally, getsmarteraboutmoney.ca blogger Alison Griffiths says youth financial literacy is all the rage but the focus has been on debt, credit, budgeting and the like. This is important stuff; but families need to include investing with the lessons their children should learn before they leave home.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

On Retire Happy, Jim Yih explains why the best retirement plan is to be debt free. Yet according to a new report from Equifax Canada, traditional “golden years” could be becoming rarer for older Canadian consumers as their debt loads rise.

Canadian consumers of all ages continued to increase their debt burden. Total debt rose by nearly $77 billion, or 6.1 per cent, compared with the same time last year. But consumers 65 and older had the greatest year-over-year increase, at 6.5 per cent, according to the credit-monitoring company.

Therefore, in this week’s Best from the Blogosphere, we focus on both how to avoid going into debt and ways to pay off your debt as you approach retirement.

In the blog A Disease Called Debt, an British couple write about how to stop wanting stuff you can’t afford.

Guest bloggers on Becoming Minimalist Gina and Josh Masters recently paid off $60,000 in debt. They offer 33 proven ways to reduce personal debt.  Another guest post from Vincent Nguyen of Self Stairway counters 10 common objections to minimalism.

Unfortunately, there is no quick fix to eliminate debt. Determining how fast we can and should eliminate debt starts with a few simple steps discussed on mint.com.

Lee Anne Davies, a leading expert on demographic change shows businesses the value of understanding aging, retirement and money issues. She partners with Globe and Mail personal finance columnist Rob Carrick in the video Seniors in debt.

And on GetSmarterAboutMoney.ca, Laurie Campbell, Executive Director at the Credit Counselling Service of Toronto and Rob Carrick discuss how a credit counsellor can help you get out of serious debt.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

Most of us are aware that saving for retirement is a must even if our savings currently fall short of what we will need. But many people have not thought much about estate planning and don’t even have a will. So this week we focus on blogs and websites that will help you and your family with end-of-life planning.

Secrets to writing a will is an article in Canadian Living that draws on the expertise of Janet Sim, past chair of the Canadian Bar Association’s National Wills, Estates and Trusts Section.

The Investor Education Fund’s blog GetSmarterAboutMoney.ca has a section on death and dying with links to blogs about a variety of related topics such as wills, reducing your estate costs and what happens to your life insurance when you die.

Acting as an executor can be very challenging. On retirehappy.ca Jim Yih provides a helpful checklist for executors.

Estate Law Canada is a valuable collection of blogs by Newfoundland lawyer and author Lynne Butler. Her most recent blog discusses what happens to the share of someone who dies before receiving her inheritance.

Widowed.ca is a free online resource for widows, widowers and their families, providing an easy way to locate a wide variety of information and services needed after the loss of a loved one. Check out the Q and As and Janet Baccarani and Jennifer Black’s book Managing Alone.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.