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Resources to help keep your personal and professional financing on track

Guest — Mon, 21 Feb 2011 10:00:00 +0000

Whether you’re a business owner, unemployed, or something in between, managing your finances isn’t something you have to do on your own. There are a number of programs and agencies out there to help you make important financial decisions—you just need to know what they are and how to find them. The following are some resources that can help make your budgeting decisions easier.

Canada Education Savings Grant (CESG)

The Canada Education Savings Grant helps parents save money for their child’s future post-secondary studies. Once the beneficiary turns 17 he or she can use the money in a number of ways, including full-time or part-time studies in an apprenticeship program, CEGEP, trade school, college, or university. As participants continue to put money into their child’s Registered Education Savings Plan, the government also adds to the fund incrementally. The amount the government adds varies based on the income of the child’s primary caregiver. Interested parties should contact the Canada Revenue Industry.

Canada Small Business Financing Program (CSBF)

The Canada Small Business Financing Act was enacted in April 1999 to help small businesses professionals get the necessary financing needed for maintaining a successful operation. Qualified business owners can get loans up to $500,000 for things like renovations, expansions, and other improvements. Likewise, the program assists new business owners in securing financing for new business start-ups. To qualify for the program, businesses must have an annual gross revenue that’s less than $5 million per year. Interested professionals apply for the program at local banks and other financial institutions who then use their discretion to issue the loan.

Job Bank

Canada offers this online service to help individuals find careers that suit their job skills in the public sector. The service allows individuals to search for jobs as well as market themselves to potential employers. Thousands of jobs from across the country are listed on the server. The service also offers separate searches for student jobs and paid internships. The service also offers a job alert option that notifies the user when a new job opening that matches their search criteria becomes available.

Small Business Internship Program (SBIP)

The Small Business Internship Program was established to assist businesses interested in giving recent college graduates real-world work experience in online development. The program’s goal is for the intern to work with the enterprise to implement an e-business strategy that will increase productivity and competitiveness. The program centers around online development, so while the company must have fewer than 500 employees, it must also have a pre-existing online presence. The program offers financial reimbursement to medium-sized businesses interested in partnering with a post-secondary student intern. The program offers to reimburse 75% of the intern’s wages up to $10,000 over a 12-week period. Interested business’s can apply for the program at participating organizations.

Universal Child Care Benefit (UCCB)

The Universal Child Care Benefit program offers additional financial assistance to parents to help pay for childcare costs. Parents registered for the program can receive up to $100 per month for each child under six that attends a child care facility. Currently, the parents of more than 2 million children receive assistance through the program. Interested applicants should contact the Canada Revenue Agency to apply for the program.

Author Bio: This article was written by Chris Foley of SuretyBonds.com. The agency aims to educate consumers on how to save money in both their personal and professional lives.

Resources to help keep your personal and professional financing on track originally appeared on Canadian Finance Blog on February 21, 2011.

Book Review – The RESP Book

Tom Drake — Tue, 09 Nov 2010 10:00:08 +0000

Since the birth of my child a little over a year ago, RESPs have been something that I’ve spent quite a bit of time looking into. With the CESG adding 20% to your contribution, and sheltering the money from taxes, RESPs are a great way to save up for when your child heads off to college or university.

Mike Holman, the blogger behind Money Smarts Blog, has put together a great resource in The RESP Book: The Complete Guide to Registered Education Savings Plans for Canadians. The book covers all the RESP account details, withdrawal rules and eligibility requirements. Mike even covers the provincial programs available in Alberta (ACES) and Quebec (QESI) and the additional grants for lower income families.

Ultimately, you can get an RESP without knowing every single rule and you’ll still get your CESG without any issue. But the most useful chapters are at the end and deal with how to get your RESP account started and some basic investing information for RESP accounts. In these chapters, Holman discusses the types of investments you could choose from (including my choice, the TD e-Series Funds) and how you go about getting your RESP setup.

I recommend The RESP Book to any new parents that want to help contribute to their child’s post-secondary education but are not sure where to start or how it all works. Mike Holman’s book provides everything you need to know about RESPs in an easy to read 115 pages.

Book Giveaway

To enter to win The RESP Book: The Complete Guide to Registered Education Savings Plans for Canadians, fill out the entry form below before the end of day on November 14th.

In addition to your first entry when filling out the contest form, you can get up to 5 bonus entries by doing any of the following:

Subscribe to the Canadian Finance Blog email, where you’ll get each article, 7 days a week with no spam emails. Please make sure you use the same email when you enter the draw.
Follow Canadian Finance Blog on Twitter and add your Twitter ID in the entry form.
Tweet one of our posts during the giveaway period (you can find a Tweet button at the bottom of any post).
Like the Canadian Finance Blog Facebook page and add your Facebook ID in the entry form.
Like one of our posts during the giveaway period (you can find a Like button at the bottom of any post)

This contest is for one copy of The RESP Book, and is open to anyone in Canada. The deadline for entries is Sunday, November 14th at 11:59PM MST and the winner will be contacted by email on Monday. There will be one winner, chosen with a random number generator from Random.org. If the winner does not reply within one week, a new name will be drawn. Good luck!

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Book Review – The RESP Book originally appeared on Canadian Finance Blog on November 9, 2010.

The INs and OUTs of RESPs

Jim Yih — Tue, 21 Sep 2010 09:00:06 +0000

If you think about it, Registered Education Savings Plans (RESPs) boil down to two really big functions – putting money in and taking it out. Let’s look at RESPs from these very important perspectives:

Putting money into the RESP

Should you put money into a RESP? The big carrot for RESPs is the Canada Education Savings Grant (CESG). Basically for every dollar you put in, the government will provide a 20% grant.

From 1998 to 2006 – The government provided a 20% grant up to a maximum of $400 per year per child. To maximize the grant, you would put in $2000 to qualify for a $400 grant.

From 2007 – The government changed the rules a little. They still provide a 20% grant but increased the maximum to $500 per year per child. To maximize the grant, you would have to put in $2500 into the RESP.

Enhanced CESG – In 2007, the government also introduced the enhanced CESG. Low income families with incomes below $40,970 are eligible for up to $600 in CESG annually. If your family income is between $40,970 and $81,941, you are eligible for up to $550 CESG annually. The income brackets are based on the Federal marginal tax brackets and are subject to change every year.

What if you do not contribute the maximum each year? There is no requirement to contribute the maximum amount into RESPs every year because every Canadian child under 18 accrues a CESG entitlement each year, retroactive to 1998. Any amount not contributed towards the CESG can be carried forward into the future. That being said, unused contributions can only be caught up one year at a time. To learn more about the unused carry forward, read about my RESP contributions into Robbie’s RESP.

Although the government has not imposed a minimum contribution, each financial institution will have it’s own minimum requirements depending on the various investments you choose.

There is no annual contribution limit, but the maximum lifetime amount is $50,000. If you contribute more than this, you may have to pay a tax on the excess amount. Unlike Registered Retirement Savings Plans (RRSPs), you can’t deduct RESP contributions from your taxes. The maximum CESG that you can earn in total is $7200. Based on the 20% grant, that means the total contribution eligible for the maximum CESG is $36,600.

Other Contribution and grant deadlines. The annual Registered Education Savings Plan contribution deadline is the end of the year – there is no 60-day grace period as there is with Registered Retirement Savings Plans. As for CESGs, these are paid out only to the end of the year in which the child turns 17.

Taking money out of the RESP

How long can you leave the money in the RESP? A Registered Education Savings Plan can remain open for up to 36 years.

What are the different types of withdrawals from the RESP? When you take money out of the RESP, you can specify whether the funds will come from contributions or non-contributions or both. There are two types of funds in the RESP account:

1. Contributions – this is the money you put into the account

2. Accumulated Income – This is all the money in the RESP, which are not contributions. It includes the CESG and growth in the plan

If you take the Accumulated income out of the plan, it is considered an Educational Assistance Payment (EAP). When doing a withdrawal, you should specify how much of the funds will be coming from contributions and how much from accumulated income. It is best to take out as much of the Accumulated Income as possible.

How is the RESP taxed at withdrawal? Once your beneficiary is enrolled in a qualifying educational program, they can start receiving payments from the plan. Withdrawals of the subscriber’s contributions are not taxable. Withdrawals of the Accumulated Income are taxable in the student’s hands. Since most students have little or no other income, they will likely pay little or no tax.

How much can you take out of the RESPs? The maximum you can take out in the first 13 weeks of schooling is $5000. Students who need more than $5000 in the first 13 weeks can apply to Human Resources and Skills Development Canada (Email: cesp-pcee@hrsdc-rhdcc.gc.ca)

Address: Canada Education Savings Program, Human Resources and Skills Development Canada, 140 Promenade du Portage, Phase IV Mailstop: Bag 4, Gatineau QC K1A 0J9

Following the 13-week period, the beneficiary can get any amount in Educational Assistance Payments. Remember that Educational Assistance Payments only include the interest and the grant. You can withdraw as much as you want of your own contributions to pay for a child’s education.

Who takes the money out of the Registered Education Savings Plan? The subscriber is in control of the RESP. It is the subscriber that requests the withdrawal. The beneficiary (or student) has no control over the money. When the subscriber makes the request for a withdrawal, he or she can have the funds sent to the subscriber or the beneficiary. There is nothing stopping the subscriber from withdrawing the funds and giving it to the beneficiary at their discretion. The subscriber is not obligated to give the money to the student all at once at the time of withdrawal. They can give the funds to the student in instalments. Getting money out of the RESP requires paperwork so Mike at MoneySmartsBlog.com suggests that subscribers take out more than less and giving it to the student as needed.

When you take money out of the RESP, what can the money be used for? When you take money out of RESPs, you will have to provide proof of enrolment. Different financial institutions can have different criteria for proof of enrolment but here’s a generic form provided by the government (http://www.arucc.ca/documents/respvoe.pdf)

Once you get the money, the government does not stipulate what you can or cannot use the funds for. You can use the money for books, rent, food, tuition, transportation or whatever you want.

What happens if the beneficiary does not go to school? If the beneficiary does not go to school, there are three options:

You may change the beneficiary. In a Family Plan, the beneficiary must be under 21 years of age and is related to the subscriber by blood or adoption.
If you are a Canadian resident and you have room, you can contribute up to $50,000 to your or your spouse’s RRSP (only if the RESP has been open for at least 10 years and the beneficiary is at least 21 years of age and is not pursuing higher education).
You can redeem the original contributions in the plan tax-free, paying back the CESG. Any accumulated earnings are subject to a 20% penalty and tax is payable at your highest marginal tax rate, or you can donate the investment earnings to an educational institution of your choice.

The RESP rules are far from simple. In a recent article entitled “Lots to know about RESPs”, I included lots of great links to sites and articles on the website. Consider it a bit of a “Best of the Best on RESPs”.

The INs and OUTs of RESPs originally appeared on Canadian Finance Blog on September 21, 2010.

Alberta Centennial Education Savings (ACES) Plan

Tom Drake — Mon, 20 Jul 2009 09:00:15 +0000

With our first child on the way, I’ve been looking into Registered Education Savings Plans (RESPs) with a plan of making the $2,500 annual contribution necessary to receive the maximum Canada Education Savings Grant (CESG) of $500 each year. While researching this, I found out about another grant called the Alberta Centennial Education Savings (ACES) Plan.

At birth, the Alberta Centennial Education Savings, or ACES, will pay $500 into the RESP of any child, born 2005 or later, who has at least one parent who is a resident of Alberta. You are not required to match this grant, though you may have a minimum contribution required by the bank to open an RESP.

When your child turns 8, 11 and 14, they may also be eligible for a ACES grant of $100. These grants require that the child is attending school and that you have contributed $100 to the RESP within the year prior to the application.

While the CESG provides a maximum of $7,200 in grants into your child’s RESP, the additional $800 in ACES grants from the Government of Alberta is an extra incentive to get parents investing in their children’s future education. While this grant may only be available to residents of Alberta, readers from other provinces may want to write their local MLA to suggest a similar program to encourage further education in their province.

Alberta Centennial Education Savings (ACES) Plan originally appeared on Canadian Finance Blog on July 20, 2009.

Registered Education Savings Plan (RESP)

Tom Drake — Tue, 14 Apr 2009 10:00:46 +0000

A Registered Education Savings Plan (RESP) allows you to save for a child’s post-secondary education. You can start saving for your child right from birth, you just need to get a Social Insurance Number for your child first as the RESP will be registered to that SIN.

RESPs are similar to RRSPs or TFSAs in that they can include various investment products in a government plan to shelter tax and encourage saving. Unlike RRSPs, but similar to a TFSA, you do not get a tax deduction when you contribute, but there is no tax withheld when you withdraw the money.

RESPs have a lifetime contribution limit for each child of $50,000. There is no annual contribution limit, but you may want to use $2,500 as your annual goal due to the Canada Education Savings Grants (CESG).

The CESG is a grant equal to 20% of your contribution, up to $500 each year. The lifetime maximum of the grant is $7,200 per child. Because of this $500 grant limit, you should consider only contributing the $2,500 a year necessary to receive the grant.

What if your child does not attend post-secondary education? After the age of 21, you can transfer up to $50,000 to your own RRSP. You do have to return the grant money though.

Looking for a simple, diversified portfolio to use in a Registered Education Savings Plan? I’d suggest an even split of the four TD e-Series Funds I’ve mentioned previously. As and example, you could contribute $100 every 2 weeks, $25 into each index fund.

Registered Education Savings Plan (RESP) originally appeared on Canadian Finance Blog on April 14, 2009.

How To Setup and Rebalance TD e-Series Funds

Tom Drake — Thu, 26 Mar 2009 10:00:23 +0000

There is a bit of effort you need to put in to invest in TD e-Series Funds, but it is worth it. First of all, you need to apply using the pdf available on the TD Canada Trust website.

The Account Application is pretty straightforward. You’ll need to provide information like your name, SIN, date of birth, and banking information.

The next couple pages are the Wealth Allocation Model and then the Investor Profile. Fill out the Wealth Allocation Model to provide your Total Point Score. This score will show you which asset mix would be right for you. TD will review this and want the asset allocation to match your score. Because of this, if you are quite sure of what allocation you want, you may want to adjust your score to match that.

The Portfolio Worksheet is where you enter the exact asset mix you want and the amount you are investing, both as a lump sum and pre-authorized purchase plan. To keep it really simple, many investors with a long enough investment time frame might benefit from a equal split into:

Fixed Income 25% – TD Canadian Bond Index
Canadian Equity 25% – TD Canadian Index
U.S. Equity 25% – TD U.S. Index
International Equity 25% – TD International Index

Next is a simple Understanding & Consent form to sign. In the Transaction Form you have to re-enter the information from the Portfolio Worksheet. These two asset mixes do need to match.

Then mail it in to TD e-Series Funds Administration. The full address is on the first page of the pdf. Once everything is setup, TD will mail you your login information.

Once a year, you should rebalance your portfolio back to your original asset mix. Using my example above, if you have a certain amount available to invest, put it into the under performing funds to bring them back up to 25%. If you do not have enough new money to re-balance, you can sell some of the better performing funds and put it back into the others. By rebalancing, it forces you to buy low and sell high.

These steps will provide a diversified portfolio, investing in the entire index that the funds track. You can rebalance it yourself and you will be paying a Management Expense Ratio (MER) of less than 0.5%.

How To Setup and Rebalance TD e-Series Funds originally appeared on Canadian Finance Blog on March 26, 2009.

TD e-Series Funds

Tom Drake — Wed, 25 Mar 2009 10:00:17 +0000

TD e-Series Funds may be the simplest way for someone to invest in a diversified portfolio with low Management Expense Ratios (MERs). Below are the four funds that you can use to build a rather complete portfolio and would work well for regular contributions into an RRSP or RESP.

TD Canadian Bond Index tracks the performance of the DEX Universe Bond Index. The Universe Index is comprised of Canadian investment-grade bonds which mature in more than one year. It has a MER of 0.48%.

TD Canadian Index tracks the performance of the S&P/TSX Composite Total Return Index. The S&P/TSX Composite Index is comprised of Canadian issuers traded on the Toronto Stock Exchange. It has a MER of 0.31%.

TD U.S. Index tracks the performance of The Standard & Poor’s 500 Total Return Index. The S&P 500 Index is comprised of 500 widely-held U.S. issuers. It has a MER of 0.33%.

TD International Index tracks the Morgan Stanley Capital International Europe, Australasia and Far East Index. The MSCI EAFE Index is a broadly diversified index consisting of equity securities of companies domiciled in developed markets outside the U.S. and Canada. It has a MER of 0.44%.

Not only do these four funds invest you in the entire index, their MERs are about 2% lower than the average mutual fund. This 2% advantage can go along way when investing over a long term.

Tomorrow’s post will detail some of the advantages that the TD e-Series Funds have over other mutual funds and show you how to open this type of account.

TD e-Series Funds originally appeared on Canadian Finance Blog on March 25, 2009.