Using TFSA and RESP for your child s post secondary education

Using TFSA and RESP for your child s post secondary education

PROJECTED TUITION FEES FOR FULL TIME STUDENTS IN CANADA University is expensive 2017-2018 $7,755 Canadian Centre for Policy Alternatives 2014-2015 $6,885

Other Fees for University Bills: Rent, Heating/Electric, TV, Internet, Cell. Credit Cards Food Clothing Misc.: Entertainment, Travel, Coffee/Latte Cash/Savings: Insurance/Emergency Funds

How Canadian University Students are paying for their bill Scholarship or Award 28% Summer or Current Work 78% Government 38% Family 59% Personal 50% Source:Macleans.CA

TFSA (Tax Free Savings Account) RESP (Registered Education Savings Account)

What is an RESP?

Post Secondary Education

Benefits Government match up to $7200 Tax Deferred growth Flexibility

You can choose the type of investment Guaranteed investment certificates (GICs) Canada Savings Bonds Mutual funds Stocks Bonds Scholarship trust units

Flexibility Lifetime Contribution: $50,000 Can contribute: monthly, annually, sporadically, or even one lump sum You can decide how much money should be withdrawn and when it should be withdrawn. The withdrawals can be used for a variety of education costs, including tuition, books and living expenses.

How to set up a RESP

1. Individual Plan 3 types of RESPs 2. Family plan 3. Group plan

Government Grant: Canada Education Saving Grant (CESG) Government of Canada- 20% Annual: $500 per beneficiary Lifetime: $7,200.

Apply for the Canada Education Savings Grant Get a Social Insurance Number (SIN) for yourself and for your child. Open an RESP, make a contribution and complete the Canada Education Savings Grant application form. Once approved, the grant money will be deposited directly into your child's RESP.

Government Grant: The Canada Learning Bond (CLB) Can add up to $2,000 to your RESP per child.

Summary of basic and additional CESG Family net income * CESG rate on first $500 (or less) per year $41,544 or less 20% basic + 20% additional CESG rate on contributions between $500 and $2,500 per year 20% basic $41,545 - $83,088 20% basic + 10% additional 20% basic More than $83,088 20% basic 20% basic

What happens if Child does not go to University The government will get back its share including any investment made off that portion

paring RESP fees Financial institutions Scholarship plan dealers Are there any fees associated with opening up a RESP? Fees to open an account Sometimes Yes Annual fees Sometimes Yes Direct costs when you buy investments Often No Source: Get Smarter Amount Money Fees or penalties for special services Yes Yes

Advantage Disadvantage TAXES Do not have to pay any tax until take money out of RESP Child will be at a lower tax rate Watch out if child is working while in school

Withdrawing Funds from RESP Just ask for your money Contributions Non- Contributions Both

What is a TFSA?

TFSA vs. Unregistered Savings Source: Government of Canada

How does a TFSA work? Annual contribution amount :$5500 Must be 18 or older

Carry Forward Contributed Amount Benefits of a TFSA 2015 1. Annual amount $5500 Plus 2. Any contributed amount from any previous year

Contribution Limits Per Year Year Contribution limit 2009 $5,000 2010 $5,000 2011 $5,000 2012 $5,000 2013 $5,500 2014 $5,500 2015 $5,500

How to set up a TFSA Contact your financial institution, credit union, or insurance company (issuer). Provide the issuer with your valid social insurance number (SIN) and date of birth so that the issuer can register your qualifying arrangement as a TFSA. Your issuer may ask for supporting documents.

Benefits of a TFSA Flexibility Can you this for any Purpose

Not taxed Benefits of a TFSA Capital Gains Investment Income

Watch out! Contribution limit Can not contribute directly to spousal TFSA

Withdrawals.Withdrawing funds from your TFSA does not reduce the total amount of contributions you have already made for the year.

What investments can I hold in a TFSA? cash guaranteed investment certificates (GICs) government and corporate bonds mutual funds publicly traded securities or stocks

Investment Risk Tolerance Quiz Get Smarter about Money.Ca >>>> Risk Profile Quiz

TFSA Fees Administration Fees/Maintenance Withdrawal Fees Commission Trades

TFSA Summary Age Purpose: Maximum you can contribute per year Tax Deductible contributions 18 or older Tax Sheltered for any purpose $5,500 No Maximum age contribution No Spousal Plan availability No

Age Before age 32 RESP Summary Purpose Maximum you can contribute Tax Sheltered for schooling after high school Lifetime $50,000 Government match Annual 20% maximum 500 lifetime 7200 Tax Deductible contributions No

TFSA and RESP both provide great advantages Use them together!

Contributi0ns are not deductible

The Power of Compound Interest

10,000 Initial Money Annual Compounded Interest 2.5% End of Year 1 $250 End of Year 2 $256 End of Year 3 $262 Total Interest $768

How much money do you need for Post secondary Schooling RESP Calculator Early Investing Calculator

Maya Wariyar Financial Advisor 3i Financial Investment Services Inc. 9040 Leslie Street, #221 Richmond Hill, ON L4B 3M4 mayawariyar@3ifinanical.com C: 647.383.8037

This presentation is for information purposes only; anyone wishing to act on the information presented should consult their advisor