How to Cope With the Sandwich Generation Squeeze

How to Cope With the Sandwich Generation Squeeze

by AgingEducationFinancial PlanningInheritanceInvestment PlanningTax Planning

 

Picture a sandwich. The top slice of bread is the responsibility of taking care of your elderly parents. The bottom slice is your young adult children who have boomeranged back home or are involved in post-secondary education. You are the meat stuck in the middle, trying to take care of both while working towards your retirement. This, in a nutshell, is the crisis the “sandwich generation” faces today. If you find yourself in this situation, take heart that you aren’t alone and you have people fighting for your best interests. The following are steps you can take to manage being stuck in the middle of caring for two generations:

Eldercare

The health insurance provided by the government leaves many elements of care uncovered or only partially covered, including nursing care at home. If one parent is still independent of you, you may wish to ask this parent to sell their home in order to downsize for extra monthly cash flow. If you are personally assisting your parent with their care, there is community care available in most regions and there is always private caregiving assistance.

Kids’ Education

The cost of post-secondary education is rising every year. Parents with two children that are close in age really feel the squeeze when both kids are enrolled at college or university.

The first step is to plan ahead and start investing early in Registered Education Savings Plan (RESP). You should consider supplementing the RESP with Tax-Free Savings Account (TFSA) investments, family trusts, in-trust accounts, or a combination of these. The Beacon Group of Assante Financial Management Ltd. can help you reach your education savings goals.

Boomerang Kids

25.9%[1] of young adults in Canada between the ages of 25 to 29 live at home with their parents. This boomerang generation can burden their parents with extra cost or prevent them from a planned downsize of their home. The key to handling this situation is communication. Talk openly with your adult children about their plans, responsibilities, and expectations to help maintain a healthy relationship with them.

Contingency fund

Nobody can predict the future. You should consider setting money aside during your prime working years to cover the potential costs of supporting your parents or adult children. The Beacon Group of Assante Financial Management Ltd. can develop a plan to help alleviate the pressures of being in the sandwich generation while setting your family up for future care as well.

 

[1] Statistics Canada, Living Arrangements of Young Adults Aged 20 to 29 (2011 Census)

Meeting Your Education Savings Goals

Meeting Your Education Savings Goals

by Education

You may find that your child’s dreams and aspirations change like the wind. One day your bright teenager will tell you they want to be a lawyer instead of an engineer. Your oldest may decide to go to medical school after graduating from university. As a responsible parent, you’d like to be able to make your child’s career aspirations come true, even if it is more expensive than you originally planned. You also have to consider the extra costs involved with studying out of town or abroad, circumstances you may not know until a few months before it happens. We would like to help you cover for situations like these, so please read further to learn more about meeting your education savings goals.

First step: build an RESP

The Registered Education Savings Plan (RESP) should be the backbone of your education savings. The contribution limit is $50,000 per child. This plan benefits from tax-sheltered investment growth, and any withdrawals made for funding tuition costs is taxed under your child’ s name. If that wasn’t attractive enough, each year the government will deposit $500 into your plan for the first $2,500 contributed. This is called the Canada Education Savings Grant (CESG). The limit is $7,200 per child.

Second step: contribute to a TFSA

The next step is to contribute money into your or your spouse’s Tax-Free Savings Account (TFSA). This is another tax-free vehicle that you should take full advantage of. You can withdraw funds for your child whenever you need them, and you can replenish the account the year after your withdrawal.

Third step: open an in-trust account

It is also a good idea to open an in-trust investment account in your child’s name. You are able to contribute as much money as you like and you have full control in what you invest it in. Any capital gains generated from these investments are taxable to your child and not to you. Any interest or dividend income is taxable to you though, until your child turns 18. It is important to remember that putting money into an in-trust account means that the money now belongs to your child. When they reach the age of majority, you will no longer have legal control over the funds.

If you want to know if your education savings will be enough to meet your child’s education goals, you should talk to a financial advisor at The Beacon Group of Assante Financial Management Ltd. today!

education fund

How to Plan for Your Child’s Education

by EducationFinancial PlanningInvestment Planning

Sometimes it feels like no time passes between the day your child nervously steps through the kindergarten doors for the first time and when they confidently walk on stage to claim their high school diploma. If you want to provide your child with funding for a university education in Canada, it takes a proactive approach – not just idly throwing a few dollars into a Registered Education Savings Plan (RESP) and hoping the numbers add up. Here are some key steps to successfully fund your child’s education:

Step 1: Know the Numbers

Each RESP has a lifetime maximum of $50,000 per child. This number may seem sufficient, but consider that according to Statistics Canada the average yearly tuition at Canadian post-secondary institutions is just shy of $6,000. With tuition rates rising by year, an average four-year program can be expected to cost $25,000 before a penny is spent on room and board ($48,000 for four years, according to the University of British Columbia) or books, fees, transportation, and personal expenses.

As evidenced by the numbers, a $50,000 contribution to your RESP is a terrific start, but it’s only a start. Supplement this fund with savings in a Tax-Free Savings Account (TFSA) and in-trust account. Your financial advisor can help you come up with other strategies for flexibility, such as taking advantage of the maximum Canadian Education Savings Grant (CESG) with a $2,500 yearly contribution to an RESP.

Step 2: Allocate Your Asset Mix

Every investor is different, and your asset mix will vary depending on your risk tolerance, time horizon, and investment objective. Your risk tolerance depends entirely on your own investment personality. The time horizon is relatively fixed, if your child plans to attend post-secondary school immediately after high school. Your investment objective should include tuition, books, and fees. Account for living expenses in case they go to a school out of town. Share these factors with your financial advisor, and they’ll help you determine the right mix of fixed income and equities to suit your goals.

Step 3: Track Your Investments

If you have an organized education savings plan in place, it is not necessary to obsessively monitor the progress of your investments. The Beacon Group of Assante Financial Management Ltd.’s advisors will make sure your investment growth is on track to meet your savings goals. If market fluctuations affect your target allocation, your advisor can assist with rebalancing to make sure everything is on track.

With these three steps and assistance from The Beacon Group financial advisors, you can meet your education savings goals. Before you know it, your child will be walking up for convocation to accept a well-earned university degree.