The Financial Umbilical Cord: 48% of Canadian Parents Still Supporting Children in 30s + MORE Mar 15th

Q. Can you please recommend an ETF for my daughter’s TFSA? Her time horizon is three to five years.
— Dina
A. ETFs are an excellent choice for long-term investors, but they’re not a good option for short-term savers. Dina, I’m guessing your daughter may need the money for tuition, or a down payment, or maybe to purchase a car in the next few years. None of those are investment goals: they’re savings goals. That’s an important distinction.
Let’s start with the key point: anyone with a time horizon of less than five years should not hold any equities. Even diversified stock ETFs can lose value over several years, so they’re just not suitable for money you plan to spend in the near future.

It’s true that there are conservative ETFs that are unlikely to lose value over brief periods, such as those holding bonds with maturities of less than five years. You can even buy an ETF that holds savings accounts and promotes itself as a “cash equivalent.” These ETFs might be useful in some circumstances—perhaps for traders who need to cash for short periods—I don’t think there is any reason to use them for traditional savings…

A recent poll from RBC shed light on an interesting dilemma that many Canadians are facing: trying to save for retirement while financially supporting adult children.
The poll found almost all parents (96%) with children between the ages of 18 to 35 said they have financially supported their adult children in some capacity. And while this is to be somewhat expected, almost half of those parents (48%) also said they are still supporting 30- to 35-year-old children.
Furthermore, the majority of those parents said they are in a position to help their adult children, but 36 percent said they are worried about how it may eventually impact their retirement savings, and one-third said it may prolong their retirement plans entirely.
One of the most common reasons why parents continue to subsidize their children’s financial needs is because they believe their children are truly struggling to become financially independent.
This is especially true in British Columbia, where almost two thirds of parents (62 percent) said their kids are struggling, whereas only 33 percent of parents in Quebec said the same…

When it comes to saving patterns, it seems like Canadians are caught at two opposite ends of the spectrum. According to a recent Bank of Montreal survey, 15 percent of Canadians managed to tuck away over $10,000 last year, yet a quarter of people did not save a dime.
Why Canadians are having a hard time saving
One in ten survey takers said they don’t think they can save any money this year, which begs the question, what is preventing Canadians from reaching their savings goals? Over two-thirds of people said they are stretching themselves too thin on expenses to be able to save, and 45 percent are trying to pay down debt.
Evidently, the Canadian household debt-to-disposable income ratio crept near 173.8 percent in the third quarter of 2018 – a record-high. Canadian household credit burdens are increasing, and economists are attributing it to the rise of interest rates over the past year and a half. Since July 2017, the Bank of Canada has more than doubled its key overnight lending rate, from 0…

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With the sleepless nights that come with a newborn it can be hard to plan even one week in the future, let alone grappling with how to save up enough money for when that little bundle of joy heads off to college or university in 18 years. Fortunately Canadian parents have a powerful savings tool at their disposal: the Registered Education Savings Plan (RESP)
Below we’ll take a look at some of the most common questions people have about RESPs to help you get started.
Here’s what you’ll learn:

What is an RESP?
How does an RESP work?
Why should you open an RESP?
How do you open an RESP?
What if you have more than one child?
Is there a contribution limit?
How do you get the RESP grant?
How should you invest an RESP?
How are RESPs taxed?
What if your child doesn’t go to school?
What if there’s leftover money in an RESP?

 

What is an RESP?
A Registered Education Savings Plan is, like the name suggests, an investment account geared towards saving for a child’s education…