This week in investing and personal finance

by Natalie MacLellan on September 10, 2010

in Week in review

Post image for This week in investing and personal finance

It is Friday, and the end of my first week back in the office after an extended vacation. I have spent nine weeks in Africa, first on vacation, and then as a volunteer teaching English and drama to orphaned girls. It was fantastic. Many thanks to the Commission staff who took care of the blog and Twitter account in my absence.

Now that I am back, I am eager to pour my energies into this space. I have lots of great ideas for the fall, and hope to introduce book reviews and guest bloggers in the coming weeks. Also, beginning today, I will provide a weekly roundup of my favourite blog posts or news articles from the week, for your reading enjoyment.

As a securities regulator, our main focus at Before You Invest is safe investing and fraud prevention. I am happy to blog about any personal finance topic that I can link to this theme, but there are still many financial issues not directly related to investing that our readers have expressed interest in. I hope that by providing these weekly reviews, we can introduce you to the wealth of great personal finance info on the web.

So without further ado – my first week in review post.

Canadian Dream: Free at 45 writes about Parents and Retirement Planning: You may be planning adequately for your own retirement, but have you considered whether – for health or other reasons – you may also have to look after one or more sets of parents.

The Canadian Finance Blog addresses the important issue of Setting up In-Trust Accounts for the Grandchildren: What does it mean, and when is it a good idea – or not?

Financial Highway addresses the oft-discussed issue of Making More Money – sometimes the only option when your budget isn’t working but there is just nowhere left to cut.

Gail Vaz-Oxlade, always blunt, honest, and to the point, writes about Position, Prospects and Price – a guide to analyzing a potential investment.

Also, there is an amusing post at Where Does All My Money Go, entitled Die Pennies, Die. My husband would be inclined to agree.

Happy reading, and enjoy your weekend.

* Links to other websites are provided as references only and as a convenience. The NSSC does not endorse any services or products that may be on those websites and is not responsible for the content of any linked website.

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Paying for your child’s education

by Natalie MacLellan on September 9, 2010

in educational resources

73213017Well, it’s that time of year again. University classes started in Halifax today, and (some) students are excited to be back – those who aren’t stressing about how they or their family will pay for yet another year of education.

A good education is a goal most parents have for their children. But the rising cost of post-secondary education has many parents concerned about whether they will be able to afford to send their children to college or university. To reduce strain on the family budget, and reduce reliance on student loans, it is wise to plan ahead and create a specific education savings fund.

Registered Education Savings Plans (RESPs) can be an effective way to save because they offer tax benefits and allow you to take advantage of federal government grants. The money earned in an RESP isn’t taxed until it is withdrawn. You can open an RESP for a child, yourself or another adult. This person is called your “beneficiary”. For more information about the tax consequences of RESPs, visit the Canada Revenue Agency website.

Different types of plans are available at banks, credit unions, mutual fund companies, investment dealers or scholarship plan dealers. Before you invest, be sure you understand all your options. Each plan type has its own rules and requirements – be sure to read the fine print. You may have to pay sales fees when you open the plan, plus other costs as long as you hold the plan.

Also, be sure you are aware of the costs of cancelling a plan. For group scholarship plans, you can cancel the plan at no cost within 60 days of signing the application, but it will cost you if you wait longer. For other types of plans, this time frame may depend on the type of investment you bought.

Most plans let you decide when and how much to contribute, up to the annual and lifetime limits. Other plans require you to make contributions according to a set schedule. In this case, if you miss a payment, your plan may be cancelled and you could lose your earnings. You will receive your contributions back, less any fees.

Federal grants can help you save even more. The Canadian government will match contributions to a child’s RESP (adults are not eligible) under the following grant programs:

  • The basic Canada Education Savings Grant (CESG) will top up your annual contribution by 20%, up to a maximum of $500 each year for each beneficiary. The lifetime limit for the grant is generally $7,200. Additional CESG grants may be available, depending on your income.
  • The Canada Learning Bond (CLB) provides an additional grant of up to $2,000 per child to help families with a modest income. Children must be born after December 31, 2003 to qualify.

For more information about federal education savings grants, visit

Once your beneficiary is enrolled in a qualifying educational program, they can start receiving payments from the plan. These payments are taxable in the student’s hands. Since most students have little or no other income, they will likely pay little or no tax. Note that some plans do not pay out earnings until a student starts the second year of a program.

If your beneficiary does not go on to education after high school, you have a few options. Your plan may allow you to choose another beneficiary. If not, you receive your contributions back, less any fees. In most cases you will receive your earnings. Some plans may keep these earnings and share them with the remaining members. In some cases, you can transfer the earnings to your RRSP. You may choose to withdraw the earnings in cash, but you’ll have to pay tax on them. You have to return any grants to the government, unless you have a family RESP.


Post image for Commodity pools and labour sponsored investment funds

In our final look at investment funds, today we describe two more complex and risky fund types.

A labour-sponsored investment fund (LSIF) is a fund that provides venture capital to new and small businesses and offers tax incentives to investors. LSIFs are issued by labour organizations or financial institutions.

These funds are riskier than traditional mutual funds, and tax credits may not be enough to offset any losses.

LSIFs have a hold period, which can be as long as eight years. If you sell your fund before the end of the hold period, you may lose your tax credits. In Ontario, the tax credit for LSIFs will be eliminated at the end of the 2011 tax year.

LSIFs incur mostly the same costs as mutual funds, although commission rates may differ from traditional mutual funds. In addition to management fees, some LSIFs also pay the manager an incentive fee.

Commodity pools are funds that invest in derivatives or commodities that conventional mutual funds are not permitted to invest in. Some commodity pools are highly speculative and have higher risk than traditional mutual funds. You could lose most or all of your investment.

Thanks for reading our Investments at a Glance series! We will be putting it aside for a few weeks, but will bring it back for Investor Education Month in October, when we explore the complicated world of alternative investments.