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.

investing calgary

Tax-Free Investing By the Ages

by FinancialInvestment Planning

When the Tax-Free Savings Account (TFSA) was first introduced, nobody was quite sure of the best way to utilize it. Since then, different strategies have emerged depending on where you are in your life. Please read on to discover the best ways to use the TFSA at each stage of your life.

Young Adults

 When you are first starting to build your savings at a young age, using the TFSA to save for short-term goals is a good idea. It’s a tax-free way to save for a car or a down payment on a home. Basically, if you think you will need to withdraw funds in the foreseeable future, start with a TFSA. Parents can use TFSAs to their advantage to help get their children off to a good start. You can use your TFSAs to help cover the cost of university education. You can transfer your TFSA to your child’s TFSA when they turn 18, and they can use that to draw from during the school year.

Established Adults

Using a TFSA for high-return investments is a smart idea, as any returns are 100% tax-free within the account and once you withdraw from it. It’s also a great place for retirement savings, as a complement to your RRSP and work pension. You can also use the TFSA in your estate planning. You can dedicate the TFSAs belonging to you, your spouse, and your child and make maximum contributions each year. All these funds grow and are paid out tax-free, when the time comes. Your TFSA funds can be transferred to your spouse’s TFSA without affecting their own allotted contribution room. One other estate planning tip is designating your TFSA assets to help offset tax liabilities, so your beneficiaries receive more of what you planned on leaving them.

Retired Adults

 As mentioned before, withdrawing from you TFSA is not considered taxable income, so it is a great way to support your retirement. This is especially true if you are in a higher tax bracket, or if you are worried about your eligibility for Old Age Security (OAS). You can also consider putting any excess cash you have into your TFSA, so it can grow tax-free and be available to you whenever you need it.

 If you have questions regarding how to best utilize your TFSA, contact a financial advisor at The Beacon Group of Assante Financial Management, Ltd.