How Insurance Can Be A Savior During Tough Times

It is very common to associate insurance with something tragic as an accident or death or destruction. But in reality, insurance has many other purposes. It is agreed that insurance is built up on little pessimism but that pessimism is good as it leads to preparedness. Today, the insurance sector is able to offer cover as well as money back in a single policy. These policies do not have any hidden catches nor do they have any links to the market. They are stable and useful.

Education savings is also a part of insurance services

It is not bad to think that one will not have enough money to send the kids to college, based on reality assessment only. In fact, education is becoming more expensive every day, and inevitable in the present context. Even if the monthly family income is not expected to be high enough, proper insurance planning can help one save for the rainy day. You can start with a planned education savings even when a child is expected. The plans require premiums to be paid, which will translate into savings with returns, when your child is ready for college. As an additional benefit, some of these plans also include insurance cover until the time of maturity.

Monthly income after retirement is also a part of insurance

Streamlining the excess is very important. Saving for the future might not be considered prudent on the principle that life is short and anything might happen anytime. But in reality, one life is bonded with many others through relationships. It is vital to be able to provide for your loved ones after retirement. On the other hand, you should also be prepared to take care of yourself, if there comes a time when your family is unable to care for you. Insurance plans that will give life cover until retirement and a fixed monthly income post retirement like IRP (insured retirement plan) can help immensely in such cases. Finding a good insurance agent will be more than enough to get the details and enroll into one. It is also a great idea to convert your retirement savings plan into a wonderful retirement income plan.

Useful Tips on Making an RESP Withdrawal

For years you have been saving up for your child’s education and when it’s finally time to use the money, how do you proceed? Before you proceed with the withdrawal, make sure you contact your financial institution for details. The rules might be a bit more restrictive in the case of scholarship or group RESPs. Here are some tips you could make use of when making an RESP withdrawal:

• Proof – When it comes to withdrawing funds from your RESP account, the proof of enrollment is more than enough to justify your payment request. However, make sure you get the specific criteria required by your financial institution. You can get a Verification of Enrolment form filled out by the educational institution. 

• Limit your withdrawal per beneficiary – In the case of family RESPs, make sure you limit the withdrawal per beneficiary to $7,200. This is the lifetime grant limit set for each beneficiary. Of course, you can set the amount yourself and it would be possible to withdraw more than this amount for one beneficiary.
  
  In this case, you will need to return the grants to the government. You can get a detailed account of the grant money given to each beneficiary from your financial institution. This will help you prevent withdrawal of inappropriate amounts.

• Go for more – Making withdrawals from your RESP account is not as simple as making withdrawals from your checking account. That’s why you might want to consider withdrawing more at once rather than small amounts. It’s not like you have to give all the money to your child as soon as making your withdrawal. You can keep it safe and pay them out on a regular basis.

• Withdraw accumulated income – It is highly recommended that you withdraw the accumulated income in your RESP account as Educational Assistance Payment or EAP. There are some cases where the accumulated amount is withdrawn as Accumulated Income Payment or AIP because the student drops out of school.
  
  In such instances, the grants have to be returned to the government. In addition, the withdrawn amount is considered taxable income and you will need to pay 20% as penalty tax as well. 

What You need to Know about RESP and its Benefits

The tax-deferred savings plan known as Registered Education Savings Plan is one of the best ways for a Canadian parent to save up for their child’s future. It is so for a number of reasons. The following are just some of those benefits:

• Better education guarantee – RESPs allow you to set aside a certain sum of money on a regular basis, so your child can have access to better education when necessary. The funds withdrawn can be used for education-related expenses including tuition, living costs, books, and travel.

• Contributions from the government – The Canada Education Grant program or CESG enables you to receive contributions from the federal government on your child’s RESP. This contribution can be up to $500 a year, as the government will contribute an amount equal to 20% of the first $2500 you contribute in a year.

• Flexible contribution plans – A major benefit of the Registered Education Savings Plan is that it offers a high level of flexibility for contributors. You get to decide the amount that should be withdrawn as well as the maturity of the plan. Also, if the funds are not paid out to the beneficiary for valid reasons, the accumulated amount can be transferred to your or your spouse’s RRSP account, given that there is available contribution room.

• Choice of plan – When starting an RESP, you have the option of going for an individual plan and a family plan. Both have varying benefits depending on the needs of different individuals. In an individual plan, there can be only one benefit. If you need to have multiple beneficiaries, you could go for the family plan.

• Savings on tax – When making contributions to an RESP account, your contributions are not tax deductible. However, the beneficiary may need to pay only little or no amount of tax on the funds owing to low income as a student. The taxes on withdrawal are charged to the beneficiary and not the contributor.

What You Need to Know about Registered Education Savings Plan (RESP)

The Registered Education Savings Plan or RESP can be defined as a contract or an agreement between two parties in which an individual (subscriber) can declare one or more beneficiaries, agreeing to make financial contributions for them. The agreement requires the other party (promoter) to pay EAPs or educational assistance payments to the beneficiaries. Let's take a quick look at some important facts you need to know about this savings plan:

• Normally, you can make contributions to family plans in the case of beneficiaries who are below the age of 31 at the time of contribution. You can, however, make transfers from one family plan to the other even for beneficiaries over the age of 31.

• Since 2007, there has been no limit on the annual contributions you make to RESP and the lifetime limit of contributions that can be made for one beneficiary is $50,000. 

• However, any payment you make under a designated provincial program or the Canada Education Savings Act will not be considered when determining whether or not the lifetime limit has been exceeded.

• When excess contributions are made, subscribers have to pay taxes of 1% per month on their share if the excess has not been withdrawn by a certain deadline. So, you can easily cut down on the liable tax amount by withdrawing any excess contribution.

• If, for some reason, the promoter does not pay out the contributions you have made to the beneficiary, you will receive the accumulated sum by the end of the contract. You would not need to declare this amount as your income.

These are just some of the basic facts you need to know about the Registered Education Savings Plan, so you can get a rough idea of the agreement before making your contributions. Whether you wish to contribute to the RESP for your children, spouse, or any other beneficiary, you can learn more about the plan to help you make the right decision.

                                                                                                 

                                                                                                                                            

Company offers free university tuition to employees! Guess who?

If you’ve been following the news this week, you would have likely heard the major news story about Starbucks offering to pay post-secondary tuition for its American employees. This is great news for Starbucks employees in America. This tuition supplement will make university an option for those who may have decided against going to university because of the cost. 

In Canada however, we are not so lucky. There are not too many companies thinking about or offering to pay tuition for you or your child. That does not mean that you should not think about it. Tuition is becoming very expensive, and the job prospects after graduation are not too rosy either. 

6 months after university, interest and monthly payments on OSAP and other government loans tend to kick in. Sometimes, students are just getting on their feet at this point, are still searching for a job, or cannot afford their monthly payment back to OSAP. This is all while interest on loans continues to grow. Having to pay back tuition can be a big burden on students just starting up their lives – and this is where having an RESP would ease the burden of tuition by offsetting all or part of tuition costs. 

Don’t you wish you had an RESP when you were in school? 

Is your child interested in becoming a Doctor or Lawyer?

Parents always want their children to succeed, and for this reason, try to encourage their children to follow specific career paths that they believe will offer prestige and a good income. Doctor, lawyers and engineers have long been prescribed for this reason (you may even be a parent that is encouraging your child to become a doctor, lawyer or engineer!).

But, have you stopped to think about how much it would cost to be a doctor or engineer or lawyer? While it may be great to have your child study in either one of these fields, are these fields that are affordable to study?

Let’s have a quick run at the numbers. (For the sake of simplicity, we’ve looked at University of Toronto’s numbers.)

Doctor

$158, 116

Lawyer

$ 91, 371

Did you know the graduating 2014 class has the highest debt of any graduating class from University of Toronto’s Faculty of Law?

Engineer (Materials and Science Engineering)

$ 49, 452

These are just basic numbers for domestic students, if you specialize, do another program, live on residence or anything else, these numbers can just be the tip of the iceberg! Education isn’t cheap!

How much did tuition cost you when you were in school?

Celebrate Financial Literacy Month!

Did you know, in a recent poll, 50% of Canadians (Insurance Bureau of Canada) responded that they want to better understand insurance?

Why understand insurance? Through understanding how insurance works, and how insurance can benefit your family, you will be better able to plan for your families future. We often get caught up with balancing our pay with our bills, that we neglect one of our biggest responsibilities in financial planning – building our safety net. Insurance provides us with that pillow of comfort, which will allow us with breathing and resting room when we need it.

Can I afford insurance? Many people think that insurance is too expensive, and that they will not need it. But the truth is, you need insurance. Many Canadians are not prepared for a financial crisis. In fact, the average Canadian owes $27,131! Holding such heavy debt loads may make it much more difficult to obtain a loan or borrow money in the event of an emergency. How will you pay for an emergency if you do not have insurance and cannot get a loan?

What should I ask my insurance agent? – Speak to an insurance agent to help see what options are available to you. Some questions to ask: What will my policy cover? Should I get a family plan or individual plan? Who will be responsible for my finances in a crisis? How can I keep my premium down?

This month, make it your priority to educate yourself about ways to protect your family.

Funding Children’s Education Resulting in Delayed Retirement

According to a recent CIBC Poll, conducted in June of this year, many Canadian parents are delaying retirement in order to be able to pay for their children’s education. Of all Canadians, Ontario parents are the ones most likely to put off retirement to fund their children’s post-secondary education, with 40% of parents with kids under 25 saying they have to put off retirement. 20% of those parents expect to delay retirement for at least another 5 years!  

In addition, many are also taking on loans and using up the retirement savings in order to help pay for tuition and other expenses. The conservative cost of raising a child is average at 5000 a year, when you factor in daycare, tuition, and other costs, this amount can be increased to 10,000 a year. When you have more than one child, this amount only increases.

This is why planning ahead, using a financial advisor, and setting up an RESP can help secure that enough funds will be ready when your child is ready to go to post-secondary. Delaying retirement may be a necessity for some families, but it does not have to be. Be smart, plan ahead and retire when you’re ready to.