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Advice is appreciated

Itsamansworld

Member
Mar 10, 2004
173
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16
Toronto
Will keep this short and to the point.

Self employed.

Know my business inside and out do not pretend to know others.

Have 15k per year for each of my kids and not sure where to put it for them.

1. Pay them 15k per year withdraw from there account and help pay for private school.

2. Insurance guy wants me to buy them insurance UL paid off when they are 25 they get the free insurance.

3. Financial adviser wants me to put 15k per year into RESP.

Not sure what to do just seems like everyone is chasing my cash like always, any input is appreciated. Need info on any trade please ask I can help there.
 

oil&gas

Well-known member
Apr 16, 2002
12,221
1,618
113
Ghawar
Not sure if I know what kind of insurance for your kids that got you
interested.

A relative of mine and her husband have been making monthly
payment for certain insurance for their two kids which I never
understood. According to them their kids (in their late teens and
early 20s by now) will be entitled to something
like $300k if one (or both) of the parents passed away. I think
the monthly payment is between $100 and $200. The couple
are in their 40s and 50s. So if they live to a long life beyond 80 it will
be the insurance company that is going to get a good deal (if and
only if our currency is worth only a fraction of what it is today 30 years
from now). OTOH if one of them passed away tomorrow one of their
kids will receive a fortune that is bigger than the networth of their parents.

Personally I am skeptical about such insurance plan but I kept my
mouth shut when it comes to my relatives' financial strategy.

Sounds like it is either insurance for your kids or RESP and
you can't afford both. How much the insurance is going to cost
you? And could you get your money back to finance your kids'
education when they are ready for college or university? Or if
you have to wait till they reach 25 how much they are going to
get paid?
 
B

burt-oh-my!

How old are the kids? If over 18 I would suggest a TFSA invested in suitable equities.
 

out4fun

Active member
Jan 8, 2008
977
42
28
I like RESP,- it's hard to find investments that are truly subsidized by the government, giving you an initial guaranteed return. (I think the governments contribution is capped after 5k per child per year).

Insurance is just a lottery, not an investment.
 

pilot123

New member
Jan 25, 2010
21
0
0
Will keep this short and to the point.

Have 15k per year for each of my kids and not sure where to put it for them.

1. Pay them 15k per year withdraw from there account and help pay for private school.

2. Insurance guy wants me to buy them insurance UL paid off when they are 25 they get the free insurance.

3. Financial adviser wants me to put 15k per year into RESP.

You have lots of choices with $15k and you can easily do all 3 that you listed.
For myself, I would go about doing this:

1) Pay your kid $10k for working at your company. Your company can write-off the $10k and your kid doesn't have to pay tax on the $10k because they're still under the 0% marginal tax bracket. Then the kid use the $10k to pay for the private school fees.

2) I wouldn't buy UL. The advisor usually use 6-10% returns for the investment estimates, but you must take into account the returns aren't guaranteed because you're depending on stock market conditions. What he shows you are illustrations only, not a guaranteed return.

If you really want to buy a "paid-up" life insurance I would get Paid-Up Whole Life insurance. This is guaranteed you won't have to pay anything more as per the insurance contract. You can pay off the insurance as fast as 10 years. Industrial Alliance and Desjardins have pretty good and reasonable priced rates assuming your kids are healthy.

Also, if you decide to cancel the policy later you're guaranteed a fixed amount. For UL you won't know what you'll be getting.

3) For RESP, its better to max out the limit of the grant money. Each year the government gives 20% matching grant to the amount you put into an RESP upto $500/yr. So if you put $2500 then you'll get an extra $500 for free. Anything you put above $2500/yr you get no grants so why bother investing more; invest it somewhere else instead. RESP Info
 

Itsamansworld

Member
Mar 10, 2004
173
0
16
Toronto
Thanks for the input guys much appreciated. What I am taking from this is the insurance is a risk and yes he said it is a 6% return which didn't exactly get me all warm and fuzzy. So if I pay each of the kids 10k zero tax implications and put another $2,500.00 per kid into RESP. I like that scenario if anyone thinks I should look at anything else or I am missing anything please let me know.

One last question is an RESP an RESP or do some do better then others. Thanks again guys I am big beliver of what you do well do it and what you do not ask.
 

duang

Active member
Apr 17, 2007
1,121
0
36
You have lots of choices with $15k and you can easily do all 3 that you listed.
For myself, I would go about doing this:

1) Pay your kid $10k for working at your company. Your company can write-off the $10k and your kid doesn't have to pay tax on the $10k because they're still under the 0% marginal tax bracket. Then the kid use the $10k to pay for the private school fees.

2) I wouldn't buy UL. The advisor usually use 6-10% returns for the investment estimates, but you must take into account the returns aren't guaranteed because you're depending on stock market conditions. What he shows you are illustrations only, not a guaranteed return.

If you really want to buy a "paid-up" life insurance I would get Paid-Up Whole Life insurance. This is guaranteed you won't have to pay anything more as per the insurance contract. You can pay off the insurance as fast as 10 years. Industrial Alliance and Desjardins have pretty good and reasonable priced rates assuming your kids are healthy.

Also, if you decide to cancel the policy later you're guaranteed a fixed amount. For UL you won't know what you'll be getting.

3) For RESP, its better to max out the limit of the grant money. Each year the government gives 20% matching grant to the amount you put into an RESP upto $500/yr. So if you put $2500 then you'll get an extra $500 for free. Anything you put above $2500/yr you get no grants so why bother investing more; invest it somewhere else instead. RESP Info
Great advice in this post.

The only thing I would add is that you can put in another $2500 per child that is grant eligible if they have unused room from previous years. Ideally, you could do $5K per year per child until you catch up on unused years. This would garner you $2K per year in free government money. By the way, it's calendar year based so if you can get the money in before yearend then you can then do again in January [i.e. $10K now and $10K in January based on assumption your kids have unused previous years]. This ideal scenario means you would have $24K invested once the grants come in within a couple of months.

D.
 
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duang

Active member
Apr 17, 2007
1,121
0
36
Thanks for the input guys much appreciated. What I am taking from this is the insurance is a risk and yes he said it is a 6% return which didn't exactly get me all warm and fuzzy. So if I pay each of the kids 10k zero tax implications and put another $2,500.00 per kid into RESP. I like that scenario if anyone thinks I should look at anything else or I am missing anything please let me know.

One last question is an RESP an RESP or do some do better then others. Thanks again guys I am big beliver of what you do well do it and what you do not ask.
Watch out for group, pooled or scholarship trust RESPs: they have high hidden fees like permanent insurance and are restricted to investing in bonds. These people make huge commissions and you have less options than the other RESPs below.

Go to your bank or advisor and buy the appropriate funds or ETFs in these "self-directed" RESPs.

D.
 

hinz

New member
Nov 27, 2006
5,672
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0
How old are the kids? If over 18 I would suggest a TFSA invested in suitable equities.
Not sure the equity part since you have no time to make up the big losses that can occur in an all-equity portfolio when the kid is over 18.
 

hinz

New member
Nov 27, 2006
5,672
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2) I wouldn't buy UL. The advisor usually use 6-10% returns for the investment estimates, but you must take into account the returns aren't guaranteed because you're depending on stock market conditions. What he shows you are illustrations only, not a guaranteed return.

Also, if you decide to cancel the policy later you're guaranteed a fixed amount. For UL you won't know what you'll be getting.
Always vigilant when your adviser solicit UL, especially after TFSA became an option. It's a red flag IMHO.

Not going to be surprised the motivation for those advisers who are aggressive to solicit UL has to do with fat commission say for the first 2 years or something. Only Annuity solicitation without you asking for one is equally worse. :rolleyes:
 

hinz

New member
Nov 27, 2006
5,672
1
0
Watch out for group, pooled or scholarship trust RESPs: they have high hidden fees like permanent insurance and are restricted to investing in bonds. These people make huge commissions and you have less options than the other RESPs below.
LOL, I would tell him or her to f*ck off if he or she solicit CST crap but I change my mind and gracefully decline the offer instead.

Go to your bank or advisor and buy the appropriate funds or ETFs in these "self-directed" RESPs. D.
Not a good idea to have self-directed RESP cause the annual fee will eat up your cash flow.

Even if you have low 6 figures investable funds in the same bank and thus waive the annual fee, the commission charge on ETF purchase will defeat any DCA.

http://www.moneysense.ca/2010/11/02/the-smart-way-to-save-for-school/
 

duang

Active member
Apr 17, 2007
1,121
0
36
LOL, I would tell him or her to f*ck off if he or she solicit CST crap but I change my mind and gracefully decline the offer instead.



Not a good idea to have self-directed RESP cause the annual fee will eat up your cash flow.
Even if you have low 6 figures investable funds in the same bank and thus waive the annual fee, the commission charge on ETF purchase will defeat any DCA.

http://www.moneysense.ca/2010/11/02/the-smart-way-to-save-for-school/
Funny that we agree on high fees in this case.

My terminology was awkward: I didn't mean "self-directed" like an RSP but rather an RESP where you can pick the investments within the RESP [i.e. at bank or mutual fund company]. ETF purchase fees might be tolerable if you were putting in your annual contribution in one chunk and especially if you were buying larger chunks [e.g. for more than one child and/or for past years].

Good link again: especially the suggested ratio of equities as the child gets closer to cashing in the RESP.

D.
 
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