This & That: Family Matters Edition

B Wrote: We just started an RESP for my daughter who is already 15. Is it true that I can’t get any of the government incentive because she is too old? I was sent a letter saying so but I was under the impression you could collect it all as a sort of “claw back” Am I missing a loophole or hoop I need to jump through?

Gail Says: You’re squeaking in under the wire m’love. As long as you make a contribution of at least $2,000 before the end of the calendar year in which your daughter turns 15, you can still grab a little of the grant money. Get busy girlfriend.

 

S Wrote: My partner and I are at odds as to which way to go with this problem. I am 66 and she is 64 and we’ve been together for 40 years so there is little danger of a breakup in the relationship. I am fully retired as of June 30/2014 and she will retire at the end of 2016. Between our two pensions (HOOPP) and CPP etc. our monthly income will be approximately $9000. What is our problem you are asking (LOL)! Well, it is this. We have a Credit Line balance of about $50000 and we have $64000 in our Tax Free Savings accounts. I want to pay off the debt but my partner says we have more than enough to continue paying off the Credit Line and leave the TFSAs alone. I see her point but hate the thought of both of us retired and still owing money…you never know when things could change. We own our townhouse and have other investments too so we are doing well. Any advice?

Gail Says: He is right from strictly a mathematical point of view. But your concerns are also valid since emotion plays a big part in feeling “safe.” Why not take the middle road: use half your TFSA money to pay down your debt, but keep your debt repayment amount the same so you get that line paid off lickety-split. Once the line is gone, take the same payment amount and re-contribute it to your TFSAs until you are caught up again. You’ll save scads in interest, keep enough in your TFSAs for any caca that might come along and serve both your needs.

 

V Wrote: This is a combination question/success post. Hubby and I were 11k in debt just a few months ago. Thanks to the magic jars and your online tools we have paid off over half that and will be completely out of debt in a few months. Thank you! My question is, after we are caught up we’ll have an extra $700/month to spend/save. We would like to be able to add some of it to the jars so we can live a little, save for a family vacation and also start an education fund for our son. I haven’t seen anything on your show about education funds. Is there a percentage that should be worked into the budget or is this part of savings? Our son is almost 13. Would $500/month be an appropriate amount? We don’t want him to have to take out student loans.

Gail Says: If you haven’t been contributing to an RESP you’ve got some catching up to do. The RESP is the right vehicle because of the Canada Education Savings Grant, which will give you a 20% bonus on your contributions (to a limit.) Here’s how it works.

1. The basic grant room is $400 per year from 1998 to 2006 and $500 from 2007. The maximum a child can receive in a calendar year is $1,000 provided grant room is available, so don’t be tempted to catch up too much at once. Each year you can catch up for roughly one year of missed contributions.

2. The CESG accumulates every year for a child until December of the year he turns 17. So you can catch up for years for which you haven’t made any contributions, but only one catch-up year at a time.

3. If you make a $2,500 contribution this year ($208 a month), you’ll get the 20% CESG of $500. If you also catch up for a previous year by making an additional $2,500 contribution ($208 a month) you’ll get another $500, for a total of $1000 in free money from the government. But if you go over that $416 a month, you don’t earn any more grant money.

4. You have to move quickly because there are rules about making contributions in the years your son is 16/17. RESP contributions at those ages are only available if :

You’ve contributed at least $2,000, and not withdrawn from, his RESP before the end of the calendar year he turns 15 OR you’ve contributed at least $100, and not withdrawn from, his RESP  in each of any four years before the end of the calendar year in which he turns 15. 

So you’ve got to get at least $2000 into his RESP before the end of the year he turns 15 to qualify for grant room when he’s 16/17. 

I have a book on the subject of RESPs and how to use them called Saving for School. Grab a copy from the library. 

 

N Wrote: My boyfriend has just moved in with me and we are in disagreement over what he should financially contribute each month. I own my home and continue to cover all costs related to mortgage, property taxes, insurance and maintenance. He states that he should not pay me rent as he is not a tenant. He has offered to pay for a couple of the utilities and expenses each month (totalling approximately $450).

He earns $100K a year, I earn $50K. Is there a standard calculation which would identify how much he should contribute each month without expecting a share in my equity? I feel he is wrong in thinking that $450 a month is adequate as he couldn’t live anywhere for that much. Am I wrong to think he should be paying more?

Gail Says: Yes, but your boyfriend isn’t going to like it. He may not need to pay you “rent” but he should contribute to the household expenses proportionate to income. So if your total overheads (mortgage, property taxes, utilities, insurance, maintenance, food, etc. totals $3000 a month, he would pay $2,000 (he makes 2/3s of the family income) and yours would be $1,000 (you make 1/3rd of the family income.) If your mate doesn’t want to contribute now, what makes you think anything will change once you’re totally vested in the relationship? Like having kids. And BTW, if you ever marry, that house you paid for becomes half his because it will be the “matrimonial home.” I suggest your boy grow up and act like a man!