A parental duty that earns you $500 from the federal government

Parents, can you save $ 2,500 by the end of the year? If so, your children’s registered education savings plan is a great place to put the money.

When you skip an RESP contribution, you run the risk of missing out on a federal grant that offers 20 cents for every dollar you add to an RESP up to an annual limit of $ 500. In other words, you want to aim for annual contributions of $ 2,500 to an RESP – 20% of that amount equals $ 500.

Times are tough for some households, so RESP contributions may have to wait. This is good because it is possible to make up the unused grant money. If you skip a contribution in 2021, you could contribute $ 5,000 next year and receive $ 1,000 as a grant. Key rules: You can recover one year of missed contributions at a time, and only until the year your child turns 17.

If you’re looking for a quick, easy, and smart way to invest that last-minute RESP contribution for 2021, take a look at Asset Allocation ETFs. Think of these exchange traded funds as a comprehensive and diversified portfolio of stocks and bonds, suitable for varying levels of risk.

Babies and children up to the end of junior high may have an RESP invested in a growth-oriented asset allocation ETF (mostly stocks), while a balanced fund (a slight tilt towards the actions) can work for the first years of secondary school. At the start of Grade 11 or 12, you would do well to consider having an RESP in the form of staggered term deposits that mature just before paying annual tuition. You’ll sacrifice the potential for growth, but you won’t have any stress at the thought of a stock market crash pulverizing a year or two of college spending.

Another idea for a turnkey RESP is to use a robo-advisor. Banks can sell their mutual funds to you for RESPs, but these products are ubiquitous in terms of cost and return. As in most aspects of investing, a low-cost ETF-based solution makes sense.

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Rob’s Personal Finance Reading List

The best time for some type of charitable donation

Soaring stock markets provide the opportunity to donate securities to charity. By doing this, you avoid making significant capital gains.

Buy less, be happier

An argument that we would be happier if we spent less money on things. Adding this element to the mix as there has been such an increase in consumer spending lately.

The pension revolt

A US financial adviser wrote about a survey which found that the happiest retirees have at least US $ 500,000 in liquid assets like stocks, bonds, funds and cash in bank accounts. Many readers did not find this information useful.

Who gets what?

A 10-point guide for parents who decide how much of their estate to allocate to their different children. From the Economic Times of India.

Ask Rob

Question: I recently read your article on Canadian Certificates of Deposit (CDRs). I am a long-time holder of Tesla Inc. (TSLA-Q) and intend to hold the stock until at least 2025. Since the stock can now be bought as CDR, I was wondering if you thought it would be a good idea to: Sell all my TSLA shares and buy back the same value in CDR; not to sell my existing shares of TSLA but to buy new shares as CDR; or, keep my existing shares of TSLA and continue to buy shares on the Nasdaq whenever I add to my position.

A: CDRs, traded on Canada’s NEO Exchange, provide a way to buy a fraction of several popular US stocks, including Tesla. A big advantage of CDRs is that they convert your Canadian dollars to US currency at a better institutional rate than what you get from your broker when you buy US stocks directly. CDRs are also hedged against currency risk, which means your returns will reflect changes in the prices of the underlying stocks without the impact of fluctuations in Canada-US currencies. I like the idea of ​​keeping Tesla shares listed on the Nasdaq and buying other shares as CDRs. There doesn’t seem to be much benefit to selling your existing Tesla holdings, given that you’ve already paid the cost of the exchange. In addition, there could be tax implications if the shares are held in a non-registered account.

Do you have a question for me? Send me. Sorry, I cannot respond to each one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

This calculator from a mutual fund company helps you determine when to start Canada Pension Plan retirement benefits. Note the equilibrium ages where delaying starts to earn you more money.

The cashless zone

Vintage Neil Young and Crazy Horse on Human race, that you will find on the new album, barn.

ICYMI

What i wrote about

• A Home Buyer’s Guide to Managing the Cost of Climate Change Improvements
• Consumer spending hit full speed with the arrival of the Omicron variant. Is a touch of restraint needed?
• “I have all of my investments in mutual funds – is this the wrong choice? “

More Rob Carrick cover and money

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