Helping Your Teen Navigate Student Loans

Helping Your Teen Navigate Student Loans

Choosing the appropriate student loan structure can be a complex and difficult decision. Yet not as difficult as fully understanding what the loan entails or the full responsibilities associated with paying the loan back. With the costs of your child’s secondary education being one of the biggest investments you’ll potentially make in a lifetime, it’s important for them to comprehend this significance and guide them on how to pay it back promptly. Read on to find ways to help your teen navigate student loans to ensure they don’t end up in a load of debt that impacts their financial stability in the future.

How much should your teen borrow?

The minimum. Your teen should be utilizing as many bursaries, grants, and scholarships that they can since majority of these options do not have to be paid back and can help curtail the overall cost of tuition. New rules set for 2017 will further help students and their families. Depending on their financial situation, borrowers can get approved for grants that include reduced monthly payments and in some cases no tuition costs. Ottawa has also increased the amount available for grants – an increase of as much as 50% for some. There are options worth investigating to greatly reduce overall tuition costs.

What type of loan is best?

Government loans are the usually the best option. Provincial loans for instance, offer a delay before the interest starts to accumulate and includes a longer repayment period. After graduation if a student is having difficulty making the payments, they can apply to the Repayment Assistance Program for help. Also, graduates won’t have to start repaying loans until they make at least $25,000 a year, and for families of more than five people that number increases to $67,825 under the new legislation.

You could also opt to engage in bank loans or lines of credits. Even though these are harder to obtain after the economic downfall in 2008, you may still be eligible for a student line of credit. These are based on the prime lending rate, and currently the rate is attractive, but if the rate rises in the future, so will the interest rates.

How to plan a repayment strategy?

Work with your teen to start saving while in school. Many graduates believe they will get a high paid job when they finish school, but this is rarely the case. It may even take months or years to obtain a decent workable salary.

So before or while the loan interest is accumulating, they should have some money put away to start combating those monthly payments. Also, work with your teen to plan out a budget before they enter school. Knowing how much they can reasonably spend each month will ensure they won’t overspend while impacting their future goals and financial security.

How to get money back?

At the end of each year you should also employ the Canadian Revenue Agency tax credits. The CRA allows students to claim a tuition tax credit for the interest payable on the student loan. Unfortunately, they are phasing out the federal textbook and education tax credit. The CRA, however, does ensure that the scholarship exemption remains unaffected by the elimination of the tax credit.

Navigating student loans can be a complicated endeavor for students. Give your child a good head start by guiding them through the process. Teach them how to budget and prioritize in order to pay that debt off as quickly as possible so they can start their future off on the right foot. Your financial advisor at The Beacon Group of Assante Financial Management Ltd. can advise on other education planning strategies to meet your child’s education goals.

A Closer Look at Tax Free Saving Accounts

A Closer Look at Tax-Free Savings Accounts

TFSAs are an excellent investment vehicle to save and grow money. With a sizeable contribution allowance and the ability to hold a wide range of investments, these savings accounts can be an excellent way for Canadians to save for their future. Here we will take a closer look at Tax-Free Savings Accounts and how they can benefit you.

What exactly is a TFSA?

A TFSA is a savings account that can help protect your future growth from income tax. Capital gains and dividends that are earned in a TFSA are not taxed, even when withdrawn.

How much can you contribute?

If you have never contributed before, by starting today you could contribute up to $52,000. The allowable contribution room is calculated per year and is indexed for inflation. Since the TFSA started in 2009, the contribution allowance has continued to grow each year.

Currently, the annual allowance is $5,500, whereas in 2009, when the TFSA was first introduced, it was $5,000. Any unused contributions can be carried forward and withdrawals result in new contribution room. When removing money from your TFSA you can add that amount back in the next year, plus the contribution amount for that year.

What are the conditions to opening a TFSA?

You must be 18 years of age and have a valid social insurance number to open a Tax-Free Savings Account.

What can I hold in a TFSA?

You can hold RRSPs, bonds, stocks, mutual funds, ETFs, GICs, options, and more. One thing to remember is that the financial rules of these instruments will still apply within the TFSA. Take GICs, for instance. If you lock your money into the GIC you cannot remove it even within the TFSA. The advantage of saving in a TFSA is that you won’t have to pay capital gains taxes if you trade within the TFSA.

Where can I find my contribution allowance?

The Canadian Revenue Agency will place the next year’s allowable contribution amount on the notice of the assessment you receive after processing your tax return. Generally, this includes the amount for the year, any amount you removed last year, and any unused contribution amounts from the years before.

Can you transfer between TFSAs?

If you have more than one TFSA you can transfer funds between them without it affecting your TFSA contribution room. You cannot however, withdraw money from one TFSA and contribute it to another TFSA – this would not be considered as a transfer and would come with penalties if you exceed your contribution allowance for that year.

What are the penalties for over-contributing?

If you over-contribute, there will be a penalty subject to 1% per month of the excess amount until the amount is removed. If you are found to be deliberately over-contributing, then you can end up paying a 100% tax on any gains you make on this amount.

Tax-Free Savings Accounts can be an excellent investment tool to help you save for the future and meet your financial goals. Speak with your financial advisor about TFSAs and other tax planning strategies to increase your personal wealth and leave more money in your pocket.

Establishing a Good Rapport with Your Staff

Establishing a Good Rapport with Your Staff

The larger your company grows, the more people you become reliant on to represent your company name. If you have built your company from the ground up it may be difficult to let go of certain tasks that were once handled by you, but as the company grows it becomes necessary to distance yourself from the daily grind and focus more on the management side of things. With the transition from workhorse into management, it can be easy to lose touch with the daily ongoings of your business. However it is important for the boss to maintain a good rapport with the staff, and here’s why.

Reputation Matters

Your staff are suddenly responsible for the reputation of your company. Anytime someone answers the company phone or writes and email with your business name on it, your business reputation is at stake. Ensuring that you have competent and intelligent staff working for you is the best way to ensure that your business is being upheld to the standard that you want it to be. Listen to your staff while they work. Talk to them, get to know them and know how they interact with clients. If you discover that they are rude or ineffective at client relations, then it may be time to consider moving them to a different role or letting them go from your company altogether.

Minimize Theft

Another reason to keep a good rapport with your staff is to minimize any internal theft. This is a problem when you have physical inventory that your staff are responsible for selling and monitoring.  If your staff think you, as a boss, don’t care about them or don’t appreciate them there may be an increased chance that they will start to steal from you, whether that’s physical theft or “stealing” time. It’s easier than you may think for staff to steal inventory especially if they are ever left alone. By showing them that you care about them and are willing to treat them with respect, it will decrease the likelihood of internal theft.

Your staff are an extension of your company, and if you want your company to continue to be successful you need to be certain that your staff are all representing the company in a positive light. Rewarding good behaviour, bringing in food or treats spontaneously to show appreciation, and just showing a general interest in their work life and personal life, where appropriate, are all great ways to ensure you keep a good rapport with your staff.

What are the Steps of Succession Planning

What are the Steps of Succession Planning?

Succession planning is an important part of business strategy. It helps you make fundamental decisions about identifying and developing new leaders, maximizing company value, tax strategy, and ensuring that your business and its clients are protected. Here are the appropriate steps of succession planning to utilize when developing your business strategy.

Analysis of Future Goals and Objectives

It is crucial to develop goals and a vision for your business, such as an exit strategy that outlines post-business ownership goals and future business plans. It’s also crucial to identify the job roles and internal structures that will be critical in achieving these strategies. This will include identifying the right skill sets, competencies, and experience required for a successor.

Decision Making to Select a Successor

Part of the decision-making process will involve role analysis and people analysis. This may involve performance reviews and psychometric testing of current employees, partners, family members deemed fit, or head hunting outside the company for relevant suitors.

This step generally involves the HR and operations departments. It will also be important to have a conflict resolution process in place to ensure that any conflicts that arise can be resolved.

Training a Successor

Once you have identified the core skills required through the above processes, you can now focus on the development and training of the new owner. You will want to ensure there is a structured development program in place that can help identify any gaps in their skills and competencies, and help easily transition them into the role. This can involve shadowing, mentoring, and available learning activities or courses.

Estate Planning

It is essential to the operations to create an estate plan to outline any estate and inheritance issues that may arise. This will include tax implications and any potential probate delays.

Creating a Contingency Plan

A contingency plan should be in place, or a backup succession plan that will go into effect if the original plan fails in case of illness, accidents, and death. This should include the financial resources required that will help protect your business and clients from a failed succession plan.

Corporate Structure and Transfer Methods Available

It will be necessary to determine all options in regards to the corporate structure going forward. This will include evaluation of your current status – whether sole proprietor, partner, or owner – and what options are available to you. Here you will also outline the possibilities available for whether you will transfer or sell the business to your chosen successor.

Financial Valuation and Market Conditions

Research will be required to obtain the fair market value of your business and the current market conditions. This will include looking at comparable properties and financial valuations.

Exit Strategy and Timeline

Creating an exit strategy and timeline will be essential to determine the steps on how and when to exit your business, while providing the most financial gain.

Implementation and Follow-Up

Once a succession plan is in place, an implementation and follow-up strategy should be conducted to ensure regular review and updating is conducted.

Having a succession plan is an opportunity to identify key risks and plan ahead for your business. Use these steps to ensure that your business strategy is safe and sound.