Category Archives: Personal finance

Changing coverage for medical marijuana

Health Canada statistics reveal the number of Canadians with prescriptions for medical marijuana more than tripled between the fall of 2015 and 2016 from 30,537 people to nearly 100,000 individuals. And with legalized marijuana for recreational use slated to come into effect July 1, 2018, it is expected that use of the drug will soar.

In response to the proliferation of legal marijuana use, life and health insurance companies have had to rethink several aspects of their pricing and coverage including whether or not:

  • Individual life insurance applicants using marijuana must pay smokers’ rates
  • Benefit plans will reimburse clients for the cost of medical marijuana.

Smoker/Non-smoker rates
Until the last several years, marijuana users applying for individual life insurance had to pay smokers’ rates. For example, a man in his 30s could expect to pay about two to three times as much for a policy than a non-smoker. A smoker in his 40s could expect to pay three to four times as much.

Insurance companies charged this massive price increase because smokers have a much higher risk of death than non-smokers. In addition, smokers often have other health problems like poor diets or an inactive lifestyles.

Within the last two years, the following insurers in Canada announced their plans to begin underwriting medical and recreational marijuana users as non-smokers, including:

  • Sun Life
  • BMO Life Insurance
  • Canada Life
  • London Life
  • Great-West Life

Sun Life is taking the most comprehensive approach, saying it will treat anyone who consumes marijuana but doesn’t smoke tobacco as a non-smoker. BMO Life Insurance is more restrained, limiting non-smoker status to people using only two marijuana cigarettes per week. Canada Life, London Life, and Great-West Life issued a joint statement which said that “clients who use marijuana will no longer be considered smokers, unless they use tobacco, e-cigarettes or nicotine products.”

This change won’t affect group benefits as coverage is not individually underwritten. An article on Advisor.ca includes a chart comparing where a series of major Canadian life insurers stand on pot use.

Drug plan coverage
So, what about coverage for medical marijuana under your benefits plan?

If your coverage includes a health care spending account (HCSA), you are in luck. Medical marijuana is an eligible expense under HCSAs because the Canada Revenue Agency (CRA) allows it to be claimed as a medical expense on income tax returns. Note that only marijuana is eligible under CRA medical exempt items, not vaporizers or other items used to consume it.

However, even though physicians are prescribing cannabis and people are using it for medical reasons, it is not currently covered under almost all traditional drug benefits. That’s because Health Canada hasn’t reviewed it for safety and effectiveness or approved it for therapeutic use the way it reviews and approves all other prescription drug products.

This means marijuana hasn’t been assigned a drug identification number (DIN), which the insurance industry usually requires before a drug can be covered. Until there is research that can be reviewed by Health Canada, marijuana will remain an unapproved drug and unlikely to be covered by your plan.

However several recent events suggest that it may be only a matter of time until group and individual drug plans offer at least limited coverage for medicinal marijuana.

Jonathan Zaid, a student at the Umiversity of Waterloo is the executive director of the group Canadians for Fair Access to Medical Marijuana. He has a rare neurological condition that causes constant headaches, along with sleep and concentration problems. Zaid said he was sick for five years before even considering medical cannabis. He tried 48 prescription medications, along with multiple therapies, all of which were covered by his insurer without question – except for medical cannabis.

After eight months of discussions, the student union (who administers the student health plan) came to the conclusion that they should cover it because it supports his academics and should be treated like a medication.

Similarly, the Nova Scotia Human Rights Board ruled in early 2017 that Gordon Skinner’s employee insurance plan must cover him for the medical marijuana he takes for chronic pain following an on-the-job motor vehicle accident. Inquiry board chair Benjamin Perryman concluded that since medical marijuana requires a prescription by law, it doesn’t fall within the exclusions of Skinner’s insurance plan.

Perryman said the Canadian Elevator Industry Welfare Trust Plan contravened the province’s Human Rights Act, and must cover his medical marijuana expenses “up to and including the full amount of his most recent prescription.”

And at least one major company is covering employees for medical marijuana in very specific circumstances. In March 2017, Loblaw Companies Limited and Shoppers Drug Mart announced in an internal staff memo that effective immediately it will be covering medical pot under the employee benefit plan up to a maximum of $1,500 per year for about 45,000 employees.

Claims to insurance provider Manulife “will be considered only for prescriptions to treat spasticity and neuropathic pain associated with multiple sclerosis and nausea and vomiting in chemotherapy for cancer patients,” said Basil Rowe, senior vice-president of human resources at Loblaw Companies Ltd., owner of Shoppers, in the memo.

“These are the conditions where the most compelling clinical evidence and literature supports the use of medical marijuana in therapy,” explained Loblaw/Shoppers spokesperson Tammy Smitham. “We will continue to review evidence as it becomes available for other indications (conditions).”

Since cannabis does not yet have a Drug Identification Number recognized by insurers, it isn’t covered under typical drug spending. However, it will be covered through a special authorization process where plan members will pay and submit their claim after, said Smitham.

The move could trickle down to other Canadian employers and their benefit plans and even set a precedent, Paul Grootendorst, an expert on insurance and reimbursement and director of the division of social and administrative pharmacy in the Leslie Dan Faculty of Pharmacy at the University of Toronto told the Toronto Star.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Financial education: A benefit employees want to see under the tree

A survey released last month in support of Financial Literacy Month (#FLM2017) by the Canadian Payroll Association reveals that Canadian workers would be very pleased if their employers decided to offer or enhance financial education programs this holiday season.

In fact employees have a strong appetite for employer-provided financial education programs, with an astonishing 82% indicating they would be interested if employers offered financial information at work. But, busy workers have timing expectation — 54% would prefer that employers offered lunch and learns but only 8% would be interested if information was offered after work hours.

Currently, 38% of Canadians rely on financial advisors and banks for financial and retirement planning advice. A further 27% of people surveyed lean on friends, family and the internet for this important information.

Employees’ appetite for financial education at work is not surprising, considering results of the CPA’s National Payroll Week Employee Survey revealing that nearly half (47%) of working Canadians are living pay cheque to pay cheque. Survey results also illustrate that many Canadians are challenged by debt, are worried about their local economy and are not saving enough for retirement.

In addition, the more recent November 2017 survey results show that working Canadians are experiencing a high level of financial stress, and that too few are keeping a close eye on their finances. Half of employees feel that financial stress is impacting their work performance. What’s more, just 52% say they budget frequently; with an astounding 31% of this group saying that they keep their budget in their head. Of those who do budget, 52% say they usually or always stick to their budget.

“We know that many working Canadians are struggling to make ends meet financially and they need help,” says Janice MacLellan, Vice President of Operations at the CPA. “While many Canadians are well-intentioned, our survey results show that they are not making enough progress towards financial health, and ultimately, this is impacting their work and their lives.”

The CPA continues to champion its key message “Pay Yourself First” to prepare for a healthy financial future. Currently 61% of Canadian employers offer a “Pay Yourself First” option through payroll which enables employees to set up automatic payroll deductions to direct a portion of their net pay into a separate retirement or savings account. Of those employers that do not currently offer this option, an additional one-third are considering making it available.

***

Members of the Saskatchewan Pension Plan can pay themselves first by having contributions withdrawn directly from their bank account using the PAC system on the 1st or 15th of the month. Other methods of contribution to SPP include: using a contribution form to contribute at your financial institution; using your VISA or MasterCard; through online banking; or by mail to the Plan office in Kindersley.

***

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Saskatchewan introduces 6% PST on insurance premiums

As of August 1, 2017, the Saskatchewan PST tax applies to premiums, fees and charges for most insurance coverage including individual and group insurance such as life, mortgage, disability and supplemental health care (e.g. drugs, dental, vision or hearing care) coverage.

Similarly, PST will also apply to benefits plans including Administrative Services Only (ASO) arrangements, funded and unfunded benefit plans and qualifying trusts.

Individual permanent life insurance policies, including whole and universal life insurance, in effect prior to August 1, 2017, are exempt from PST, including all future premium payments with respect to these policies.

However, new individual permanent life insurance policies effective after July 31, 2017, will be subject to PST. Endorsements added to insurance contracts with an effective date prior to August1, 2017, are also not subject to PST.

Employee premiums under group insurance plans are taxable depending on both the place of employment and residency. An employee must live and work in Saskatchewan for the employee premiums to be taxable.

Taxability of Group Insurance Premiums
Where the employee lives Where the employee works Employer premiums Employee premiums
Saskatchewan Saskatchewan Taxable Taxable
Outside Saskatchewan Saskatchewan Taxable Exempt
Saskatchewan Outside Saskatchewan Exempt Exempt

SOURCE: Aon Hewitt Consulting

Where there is an Administrative Services Only (ASO) agreement (a contract between an employer and a third-party administrator), the premiums or payments to claimants can include dues, assessments, administrative costs and fees paid for the administration of the plan. PST will be collected on these charges and also on the premium or the payment of benefit amounts.

Several other provinces also currently charge retail sales tax on all insurance premiums including Ontario (8%) and Quebec (8%). Manitoba applies 8% RST only to life, disability, critical illness and AD&D premiums.

The polling firm, Insightrix, asked 802 respondents:  “How will your household change its insurance purchasing plans once PST is charged on all insurance premiums?” That question prompted the following responses:

  • 20.3%: Reduce insurance coverage (such as downgrading the level of home insurance coverage, purchasing less crop insurance, etc.)
  • 13.8%: Stop renewing some policies (such as cancelling a package policy on a vehicle)
  • 48.6%: Our household won’t change its insurance purchasing plans;
  • 25.4%: Not sure

“Charging the PST on insurance comes with an obvious risk,” says Todd MacKay, the Canadian Taxpayers Federation Prairie Director. “Hitting premiums with the PST will run up insurance costs by hundreds of dollars for families and thousands or tens of thousands of dollars for farmers and small businesses. More than a third of Saskatchewanians say they’ll have to reduce coverage or stop renewing some policies and that means people will have less protection when bad things happen.”

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What to look for in a long-term care home

When the health or capacity of a loved one deteriorates and the family decides that a nursing home is the best care option, it can be a very traumatic time for both the caregivers and the patient. You want to ensure your parent or friend is placed in a facility where they will get the best possible care in a safe, nurturing environment.

However, depending on the length of waiting lists and where you live, your choices may be very limited. For example, this directory of long-term care providers in Saskatchewan illustrates that in many smaller communities there is only one government-subsidized nursing home. And if a bed becomes available you will likely have to decide whether or not to accept it on very short notice.

Last week we wrote about “What you need to know about residential care for seniors in Saskatchewan” and discussed the difference between retirement homes and nursing homes (special care homes). This week we offer a checklist of things to look for when you are evaluating the suitability of a special care home for your family member.

The Canadian Association of Retired People (CARP) has developed an extensive catalogue of things to look for. Here (in no particular order) are some of my favourites, including questions we asked when my mother recently moved into long-term care.

  1. What is covered in the regular monthly fee and what additional charges can be expected?
  2. Are residents clean, well-groomed and appropriately dressed?
  3. Do they seem happy?
  4. How do family members of current and past residents rate the facility?
  5. What activities are available for residents?
  6. How long have senior staff worked for the residence?
  7. Do staff appear to be happy?
  8. What is the staff-to-patient ratio of PSWs, RPNs and RNs to residents on each shift?
  9. Does the home rotate all staff members or try to keep the person(s) caring for each resident?
  10. Are there any limitations on visiting hours?
  11. How do family members participate in the care plan?
  12. How are care complaints handled and by whom?
  13. Do doctors, physiotherapists, denturists, podiatrists regularly come to the residence for patient care?
  14. Does a hairdresser and manicurist regularly attend to provide personal care?
  15. What resources are available for the care and safety of residents with cognitive impairment?
  16. Are religious holidays and birthdays celebrated? How?
  17. What are the policies and procedures for ensuring that personal clothes and belongings are not lost or stolen?
  18. What is the home’s fall prevention program?
  19. Can the resident bring personal furniture, pictures and other knick knacks?
  20. What are the policies and procedures for handling a resident who is harmful to himself/herself or other residents?
  21. Does the home have a palliative care program?
  22. Will the food appeal to your loved one?
  23. Can a family member have a meal with their loved one? If so, is there a fee?
  24. Are special menus available for people who require soft food or other special diets?
  25. Does the menu suit your loved one’s cultural or religious regulations?

Regardless of the answers you get to these and other preliminary questions, once your loved one moves in, it is important for family and friends to visit as often as possible at various times of the day and in the evening both to keep his/her spirits up and monitor the actual care he/she is receiving. In many cases elderly or infirm patients are incapable of advocating for themselves.

Generally we are very happy with the facility we chose for Mom, but we have to stay on top of things. For example:

  • When she returned to the residence after she broke her hip we had to encourage staff to get her up and walking so she didn’t totally lose her mobility.
  • She is supposed to get her hair done every week and a manicure every two weeks but inexplicably, her name sometimes doesn’t make it onto the list.
  • There is lots of staff, but they are rotated and often it seems like the right hand doesn’t know what the left hand is doing!

By understanding the rules and limitations of the special care home where your loved one resides, you can monitor care more effectively and provide additional support as needed.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What you need to know about residential care for seniors in Saskatchewan

Whether you are a member of the “sandwich generation” with young children and older parents or you are a senior yourself, sooner or later you will need to understand the residential care options in Saskatchewan for individuals who can no longer live at home, and how much they cost.  Typically, residential facilities are characterized as either retirement homes or government-subsidized nursing homes. In the discussion below we distinguish between the two, the services provided and how much they cost.

Retirement home/residence 
A retirement home in Saskatchewan is a multi-residence housing facility that provides accommodation and services such as meals and cleaning for older people. Retirement homes in the province are privately owned and operated and not administered by the provincial government. Each facility usually provides a private or semi-private room or complete living suite as well as common living quarters, including a lounge area, a common dining room, recreation rooms, cleaning services, social and/or religious programs and some basic health care services.

The unit can be paid for on a monthly fee basis, like an apartment, or can in some instances be bought the same way as a condominium. Admission, fees and waiting lists for retirement homes are controlled by the homes themselves, not by the government. Admission usually depends on the ability to pay and absence of serious medical conditions that require professional nursing care. Residents are responsible for paying their own fees and government subsidies are not available for accommodation in a retirement residence.

Costs for Retirement Homes*

Type of Accommodation Provincial Median Provincial Range Regina Median Regina Range Saskatoon Median Saskatoon Range
Private Rooms(per month) $2,475 $1,500 – $5,500 $2,850 $1,800 – $5,500 $2,425 $1,600 – $4,000
1 Bedroom Suites (per month) $3,415 $1,580 – $4,170 $3,750 $3,500 – $4,100 $3,150 $1,580 – $4,042

*As reported in Long Term Care in Saskatchewan 2016

Government-Subsidized Nursing Homes**
Nursing homes or special care homes, as they are called in Saskatchewan, are residential long term care facilities that provide 24-hour professional nursing care and supervision for people who have complex care needs and can no longer be cared for in their own homes.

These facilities are owned and operated by municipalities, religiously affiliated organizations and private, for-profit organizations. However, nursing home fees are set by the Saskatchewan Ministry of Health.

Admissions to residential long term care facilities are managed by local Regional Health Authorities (RHAs). An intake coordinator or social worker from the RHA conducts an in-home assessment with clients and their families to assess care needs and program options, to coordinate access, explain fees and coordinate placement into long-term care facilities.

A report of the assessment is sent to the Regional Committee, who decides on acceptance. Clients who are eligible for access to a long term care bed generally access the first available bed in the system and then transfer to a facility of choice. A chronological wait list is maintained by the RHA to ensure fair and equitable access to a facility of choice.

Eligibility/Requirements for Admission 
To be eligible for subsidized care services, a client must:

  • Be a Canadian citizen or permanent resident over 18 years of age.
  • Require ongoing care (usually 24 hour care, seven days a week) due to age, disability, injury from accidents, or long-term illness.
  • Hold a valid Saskatchewan Health Services card, or be in the process of establishing permanent residence in Saskatchewan and have applied for a Saskatchewan Health Services card.

Income/Asset Test
The client’s income is assessed by Saskatchewan Health.  Income Tax returns of applicants are reviewed once the Regional Committee has approved the admission of the client into a nursing home. The client’s application is sent by the RHA to the nursing home, which in turn sends it to Saskatchewan Health for income assessment.

A resident pays the standard resident charge ($1,086 at July 1, 2017) plus 57.5% of the portion of their income between $1,413 and $4,200. For married residents, including common law couples, the couple’s income is combined, divided equally and then the above formula is applied.

The resident and spouse (if applicable) are required to provide:

  • The most recent year’s Notice of Assessment(s) from CRA, or
  • Pages 1 to 3 of Income Tax Return(s) upon admission and annually thereafter.

If income information is not provided, the resident charge will be assessed at the maximum rate.

A resident admitted for temporary care must pay the income-tested resident charge if their stay is more than 60 consecutive days.

Examples of resident charges at various income levels

Monthly Income Monthly Resident Charge
$1,413 $1,086 (minimum)
$2,000 $1,423
$2,500 $1,711
$3,500 $2,286
$4,200 $2,689 (maximum)

 

Married residents living in separate special care homes 
Married residents who live in separate dwellings for reasons beyond their control may choose to complete an Optional Designation Form.

  • With this designation, only the resident’s income is considered when calculating the charge.
  • Choosing this designation does not change a couple’s marital status.

Additional charges
In addition to the resident charge, there is an additional cost for prescriptions, medications, incontinence supplies, and certain medical and personal supplies and services.

There is also a $21.25 monthly supply charge for personal hygiene items, such as shampoo, conditioner, soap, denture cream, toothpaste, mouthwash, etc. This charge is adjusted annually based on increases to Old Age Security and Guaranteed Income Supplement benefits

** As reported in Special Care Homes

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Your guide to upcoming CPP changes

In June 2016 federal, provincial and territorial finance ministers finally reached an agreement to expand the Canada Pension Plan. However, because the changes will be phased in over an extended period, there has been considerable confusion among many Canadians about how both CPP contributions and benefits will increase, and who the winners and losers will be.

The Globe and Mail reports that an expanded CPP is designed to address the shortfall in middle-income retirement planning that is occurring as a result of disappearing corporate pensions. “Most at risk are workers under the age of 45 with middling incomes – say, families earning about $50,000 to $80,000 a year,” note authors Janet McFarland and Ian McGugan. “Without the defined-benefit pensions that their parents enjoyed, many could hit retirement with little in savings.”

Here is what you need to know about the planned CPP changes.

Effects on CPP retirement pension and post-retirement benefit:
Currently, you and your employer pay 4.95% of your salary into the CPP, up to a maximum income level of $55,300 a year. If you are self-employed you contribute the full 9%.

When you retire at the age of 65, you will be paid a maximum annual pension of $13,370 (2017) under the program if you contributed the maximum amount each year for 40 years (subject to drop out provisions). People earning more than $55,300 do not contribute to CPP above that level, and do not earn any additional pension benefits.

The first major change will increase the annual payout target from about 25% of pre-retirement earnings to 33%. That means if you earn $55,300 a year, you would receive a maximum annual pension of about $18,250 in 2017 dollars by the time you retire — an increase of about $4,880/year (subject to the phase in discussed below).

The second change will increase the maximum amount of income covered by the CPP (YMPE) from $55,300 to about $79,400 (estimated) when the program is fully phased in by 2025, which means higher-income workers will be eligible to earn CPP benefits on a larger portion of their income.

For a worker at the $79,400 income level, CPP benefits will rise to a maximum of about $19,900 a year (estimated in 2016 dollars). Contributions to CPP from workers and companies will increase by one percentage point to 5.95% of wages, phased in slowly between 2019 and 2025 to ease the impact. The federal finance department says the portion of earnings between $54,900 and $79,400 will have a different contribution rate for workers and employers, expected to be set at 4%.

The enhancement also applies to the CPP post-retirement benefit. If you are receiving a CPP retirement pension and you continue to work and make CPP contributions in 2019 or later, your post-retirement benefits will be larger.

Impact on CPP disability benefit/survivor’s benefit
The enhancement will also increase the CPP disability benefit and the CPP survivor’s pension starting in 2019. The increase you receive will depend on how much and for how long you contributed to the enhanced CPP.

Impact on CPP death benefit
There is currently a one-time lump sum taxable death benefit of $2,500 for eligible contributors of $2,500. This amount will not change.

The main beneficiaries of the CPP changes will be young employees, who are less likely to have workplace pension plans than older workers. To earn the full CPP enhancement, a person will have to contribute for 40 years at the new levels once the program is fully phased in by 2025. That means people in their teens today will be the first generation to receive the full increase by 2065.

The recently released Old Age Security report from chief actuary Jean-Claude Ménard which includes the GIS illustrates how higher CPP premiums scheduled to begin in 2019 will ultimately affect the OAS program.

The report reveals that because of the planned CPP changes, by 2060, 6.8% fewer low-income Canadians will qualify for the GIS, representing 243,000 fewer beneficiaries. This will save the federal government $3-billion a year in GIS payments.

In other words, higher CPP benefits mean some low income seniors will no longer qualify for the GIS, which is a component of the Old Age Security program. The GIS benefits are based on income and are apply to single seniors who earn less than $17,688 a year and married/common-law seniors both receiving a full Old Age Security pension who earn less than $23,376.

Also read: 10 things you need to know about enhanced CPP benefits

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

How much should you contribute to your child’s education?

According to a May 2017 Globe and Mail Report average university/college tuition in Saskatchewan is over $7,000/year but you need to also factor in living expenses, books etc. And if your child is just starting kindergarten, it is not easy to predict how costs will escalate over the next decade or more.

Many parents wisely take advantage of the tax breaks and grants available by saving in Registered Educational Savings Plans. But they also expect their kids to contribute to the cost of their post-secondary education by applying for scholarships, working part-time and taking out student loans.

Therefore it is interesting to note the results of a recent poll conducted on behalf of RBC® that found students who receive less than one-quarter of their funding from parents feel more confident in their financial decision-making and are more likely to make and stick to a budget compared to their peers who receive more family financial support .

Students whose parents contribute less than 25% Students whose parents contribute 25% or more
I feel confident in my financial decision making 50% 41%
I make a budget and stick to it 42% 33%

 

Expectations after school
Students receiving more financial support not only have more expectations of parental assistance during school but are twice as likely to expect some help from their parents post-graduation (21% compared to 11%).

“While contributing financially to your child’s education is a wonderful gift, being clear on expectations from both parties is really important. Make sure you discuss the ‘terms’ including when financial support will end,” says Laura Plant, RBC Director, Student Banking

Tips for Parents

  1. Have “the talk”: Start talking about budgeting and money management with your child early on. The earlier you get the conversation started, the more prepared everyone will feel when it comes time to start paying for tuition and other expenses. The transition to post-secondary education is significant – reducing money stresses is one way of easing the change.
  2. Start saving early: If you plan on contributing to your child’s education, save early and save often. One way of getting started is by opening up a Registered Education Savings Plan.
  3. Set the expectations: If you plan on contributing to your children’s post-secondary education, set the expectations on what you will contribute and what you expect them to contribute. Getting everyone on the same page is an important first step.

Tips for Students

  1. Don’t leave free money on the table: No matter how you are funding your education, there are lots of resources out there to help you access free money, including scholarships. Resources such as ScholarshipsCanada.com and StudentAwards.com will help you on your journey to free money.
  2. Save, Save, Save: Develop a habit to save on a regular basis. No matter how small the amount, saving can help you achieve your short and long term financial goals – whether it’s paying for tuition, rent or saving up for a reading week vacation. Let your money work harder for you by setting up automatic transfers from your daily chequing account into a separate high-interest savings account or guaranteed investment certificate to be used towards your goals.
  3. Talk to an expert: Let’s face it, as a post-secondary student (or soon to be student), you have a lot on your plate. Speak with a financial advisor on how to start saving and what options make the most sense for you and your family. This will help set you up for success.

We contributed to our childrens’ university education using RESP savings and current earnings. While I didn’t keep track of how much we gave them or what percent of their educational expenses we covered, they were able to graduate from their first degrees debt free.

Both kids also have Masters degrees and took post-graduate professional college programs which they self-financed. My son had scholarship money and my daughter worked for a major public sector union that paid for her tuition as she successfully passed each course.

I am quite confident that the financial lessons they learned living on a student budget and helping to support themselves were just as important to their future success as the programs they formally studied at university.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Gifting money to your children now, rather than later

According to a recent CIBC poll, the majority of Canadian parents with a child 18 years or older (76%) say they’d give their kids a financial boost to help them move out, get married, or move in with a partner, with nearly half of them giving an average of about $24,000.

And, when given the option, almost two-thirds of parents would prefer to give cash rather than have their adult child and partner/spouse live with them. Yet, most Canadians (68%) either misunderstand or say they don’t know the tax and other financial implications of gifting.

“The poll findings show that while many parents are thinking about giving their kids a financial boost to leave the nest, there are a lot of misconceptions about gifting,” says Jamie Golombek, Managing Director, Tax and Estate Planning,  CIBC Wealth Strategies Group.

In his new report, Give a Little Bit, he says, “Unlike in the U.S., we don’t have any kind of gift tax, which means if you have what’s called ‘never money’ – money you’ll never spend in your lifetime – it’s worth considering making a financial gift while you’re alive to help your kids get started in life.”

Mr. Golombek addresses the misconceptions about financial gifting and provides important tips on tax considerations in his Give a Little Bit report and accompanying video.

Key poll findings:

  • 76% say they’d give financial support to help an adult child move out, marry or live with a partner, while 24% wouldn’t provide any financial support.
  • Of parents providing financial support:
    • 47% would give money in the form of a financial gift
    • 28% would let their adult child and his/her partner live with them
    • 25% would act as a guarantor on a mortgage
  • 65% of parents would prefer to give a financial gift than have their adult child and spouse/partner live with them
  • $24,125 is the national average gift size. Those with household incomes of more than $100,000 gift nearly double that amount ($40,558) with as many as 25% giving over $50,000.
  • 68% of Canadians either misunderstand or don’t know what taxes exist on financial gifts

Gifting risks
The poll finds that parents are split on whether or not to tie a financial gift to major or special milestones like buying a home, graduation, birth of grandchildren, or settling down with a spouse. Further, more than half (55%) of parents are concerned about gifting to their children, with two-in-five of them admitting they may need the money later and almost a third (29%) worrying that their son or daughter won’t use the money ‘wisely’.

As well, more than a third (37%) of all parents say they’re comfortable taking on debt to help their kids get a good start. However, few parents will actually tap into their credit lines or borrow from family and friends and most (80%) of those giving money will draw from cash and savings to fund their gifts.

“The caveat to making any financial gift is that you generally don’t want to put your own finances at risk,” says Golombek. “You need to map out the lifestyle you want in retirement and the money you’ll need before making a financial gift.”

Bequeathing Boom
Over the next decade, baby boomers are expected to inherit an estimated $750 billion, according to a CIBC Capital Markets report. Based on the findings from the CIBC Gifting Poll, likely a good chunk of the bequest boom will skip a generation as 74% of parents aged 55+ say they would pay forward their inheritance or a portion of it to their children or grandchildren if they received an inheritance today.

“When you gift during your lifetime, you’re able to enjoy seeing your beneficiaries use the money while at the same time reaping potential tax savings opportunities,” Golombek says. “In addition, by gifting assets before you die, these assets will not be subject to probate fees because they will not be part of your estate.”

He offers five tips for gifting:

  1. Talk to your financial advisor to determine how much ‘never money’ you may have.
  2. Gift cash in Canada with no tax implications (gifting appreciated property may trigger capital gains tax).
  3. Minimize taxes for the entire family by gifting property to family members in lower tax brackets.
  4. Use strategies to avoid probate tax of up to 1.7% (depending on the province/territory) of the estate’s value.
  5. Help kids buy a home or pay down debt with a secured mortgage.

Also read: Déjà-Boom: Boomerang kids collide with retirement goals of boomer parents

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.