RRSP or TFSA? Go For TFSA When You Can’t Decide

TFSA: You Can’t Go Wrong

First Published Date: February 18, 2017

This time of the year, when the RRSP deadline is fast approaching, it’s hard not to notice an article about TFSA or RRSP in Canadian newspapers or magazines. However, if you get confused after reading so many of these articles and can’t decide, going for a TFSA is not a bad option at all.

In the past, I wrote about TFSA. As far as I can remember, that was the only time I wrote about TFSA, as after seeing so many articles about TFSA and RRSP again and again and writing about the same stuff I decided not do discuss it anymore. And that is a good change for someone who is trying to sort out TFSA and RRSP will only be more confused after bombarded with too much information.

If you are confused about these two and still not sure, the best thing to do is park your money in a TFSA, rather than in an RRSP. The reason is very simple: TFSA lets you able to take out your money any time without paying back withholding taxes, unlike an RRSP. One thing you need to keep in mind is that the money you are taking out from your TFSA will create equal contribution room next year, not in the same year.

And what should you do if you want to get some clear grasp of TFSA? Talk to a qualified financial professional face to face. And yes, don’t forget to write down all your questions and concerns before meeting

Can A Minor Open An RRSP?

Minor RRSP

First Published Date: September 25, 2016

Contrary to popular belief, there is no age restriction to open an RRSP (Registered Retirement Savings Plan).
Here are the requirements to open an RRSP for minors:

– A SIN (Social Insurance Number)

– Legitimate earned income

– Recorded income with proper documents

– Filed T1 tax return

Advantages of a Minor RRSP

There are lifelong advantages of opening an early age RRSP. Here are some of them:

– There is no need to make contributions right away. Contributions can be made anytime later – with no time limit.

– RRSP room keeps accumulating, which can be carried forward indefinitely

– Increases lifetime contribution limits

– Allows minors to contribute to RRSP right after starting in the work force because of the available contribution room.

– RRSP deduction can be claimed later on when there is enough taxable income.

– Provides income-splitting opportunity for business-owner parents. Kids can work as an
employee for their parents’ business and salary paid to them will be tax deductible and it will create contribution room for kids.

– Provides an opportunity to teach kids about personal finances.

– Contributions start growing tax free inside an RRSP.

Author/Copyright: Ahmed Dawn www.adawnjournal.com

Disadvantages of a Minor RRSP

– Not all financial institutions offer minor RRSP.

– A co-signer may be required.

– Financial institutions may limit what types of products can be purchased.

The best thing to do would be shop around and find the right institutions that suit your needs. Minor RRSP can be a great investment vehicle towards a better financial future with lifelong benefits for kids.

How Long It Takes to Double Your Money

The Rule of 72

First Published Date: September 8, 2016

Have you ever wondered how long it takes to double your money? There is a simple formula to calculate how many years you will need to double your money.

The simple formula is called The Rule of 72. This rule only works when you compound your interest annually and do not take out money from your account. To find out how many years you need, divide 72 by your interest rate. Here is an example: Assume your interest rate is 12%, you will double your money in 6 years (72/12=6).

Author/Copyright: Ahmed Dawn www.adawnjournal.com

If you add more money monthly to your initial investment, your time to double investment will be less. Investment is a discipline and don’t expect to double your money overnight. Start investing at an early age, keep adding more money on a monthly basis, and stick to it for the long run – you will achieve your financial goals.

What Is OSAP (Ontario Student Assistance Program)?

The Ontario Student Assistance Program

First Published Date: Sep 29, 2011

The Canadian Government does not want any students stop going to college or university because of the lack of financial support. In order to prevent that, the Government provides financial assistance to eligible students in paying for their post-secondary education through various programs and services throughout Canada. OSAP or Ontario Student Assistance Program is the main source of assistance in the province of Ontario. OSAP is a student loan program which is made up of both federal and provincial funding for the eligible post-secondary students living in Ontario.

OSAP Loan Amount

The amount students receive will be based on their financial need. This amount is designed to cover expenses such as tuition, books, living costs, transportation costs, and so on. There are various factors that determine the loan amount such as parent’s income, marital status, student’s own or spouse’s income, course type (full-time, part-time) course length, and so on. There is a financial aid estimator or calculator available to give you an approximate idea of the amount based on your scenarios. To find out more, check Government of Ontario OSAP website.

OSAP Eligibility

There are many criteria that need to be fulfilled in order to be eligible for OSAP. Some of them are:
– You have to be a Canadian Citizen, permanent resident, or a protected person.
– You have resided in Ontario for the last 12 months
– You academic standing is satisfactory
Visit the OSAP site mentioned above for full eligibility criteria.

How to Apply For OSAP?

There are two ways to apply for OSAP: via paper application and online. Online application is quicker and therefore the preferred way. There is a cost of $10 to apply via paper application.

OSAP Loan Repayment and Interest

Once students graduate, stop attending school, or reach lifetime maximum, repayment of OSAP will start. Loan repayment starts 6 months after the student ends full-time status. The loan is interest-free and interest is paid by the government as long as students remain full-time.

Last Word

OSAP is no different than any other loan and as such, you should treat it with responsibility and care. Not handling the OSAP properly can affect your credit rating. If you have difficulties paying OSAP, don’t wait for the last moment. Contact the National Student Loan Service Centre (NSLSC) at 1-888-815-4514 or visit their website at NSLSC.

Quietly These New Mutual Fund Rules Take Effect in Canada

Canada’s New Mutual Fund Rules

First Published Date: July 23, 2016

Starting May 30, new mutual fund rules came into place that most mutual fund investors were not aware of. Any investment advisers and institutions selling mutual funds are required to give their clients a document known as Fund Facts before the sale or transaction happens.

This paper or document called Fund Facts should clearly show information about the mutual funds in a simple way such as funds’ investment objectives, managers, historical performance, and most importantly all the fees associated with the funds.

In the past, this information was available online at the fund companies’ websites and it was made available to the investors after the sale had gone through. However, the information was not presented in a clear manner easily understood.

However, under the new rules, investors will have precise and related information at their disposal and this will help them make better decisions.

Author/Copyright: Ahmed Dawn www.adawnjournal.com

The Fund Fact document is a two-page, double-sided document that does not take long to read. If you want, you can have this document long before meeting your advisers by going online or calling the fund company to mail it or fax it to you. This is all free.

Mutual funds in Canada have been known to have one of the highest fees compared to other countries and trends continue to switch from mutual funds to ETFs, which have much lower fees and transparent features that are easy to understand and easier to transact.