Tag Archives: Bankrate.com

May 2: Best from the blogosphere

By Sheryl Smolkin

My husband and I helped our daughter buy her first house and a few years ago we bought my son a car. We also partially paid for their education so they were able to graduate debt free. I consider these gifts as an excellent investment because we could afford it and it was our pleasure to share our good fortune with them when they needed it most.

So when I came across Sean Cooper’s blog Why Millennials Should Save Their Down Payment and Not Rely on the Bank of Mom and Dad, I figured I’d better find out what he has to say. Sean believes that parents who cough up all or part of the down payment for a house are generally hurting their offspring instead of helping them. “By showing your millennial child tough love, you’re teaching your kids a valuable lesson: not everything in life is handed to you in a silver platter,” he says.

In an excerpt from his book The Bank of Mom and Dad: Money, Parents, and Grown Children published in the Globe and Mail last year, Derrick Penner says the first question the family should explore is whether the timing is right. For young adults just setting out on a new career, it might be more logical to rent (assuming they’ll also be able to save some money) and kick-start an investment plan that would lead to home ownership later than to buy real estate before they’re really ready.

But if you do decide to give cash to your kids for a down payment, How to help your kids buy a home by Michele Lerner on Bankrate.com has some great tips. First and foremost, she says make sure your own retirement needs are adequately funded before you part with a large lump sum. Also, if you co-sign on a mortgage or loan, understand that you will be liable if your child defaults, so make sure in a worst case scenario you can also afford to make the mortgage payments.

Help your child buy his/her first home, a post on GetSmarterAboutMoney.ca says if you do decide to go ahead, there are three common options: loan your child the money; co-sign your child’s mortgage; or pay some or all of the costs as a gift. Make sure you understand the pros and cons of each option, and how your tax situation and financial plan could be affected.

And finally, an article last year by Adam Mayers in the Toronto Star correctly notes that Emotions can run high when helping the kids buy a house. He says that if family-financing is in the home-buying cards for the younger generation, some issues to consider are: securing any loan via promissory note or against title; the pros and cons of joint ownership; and, how to get your money back. In a mini-poll in the article 68% of those who voted said they would be willing help their kids with a down payment for a home.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Aug 17: Best from the blogosphere

By Sheryl Smolkin

You’ve been diligently socking away money in a Registered Educational Savings Plan (RESP) since your child was a toddler and in a few short weeks she starts university. Getting at the money can be a little more complicated than simply taking out money from your savings account. To help you through the process, this week we feature articles and blogs exploring all things relating to RESP withdrawals.

Mike Holman on Money Smarts discusses RESP withdrawal Rules and Strategies for 2015. He says there is one withdrawal rule to get out of the way – you are only allowed to take out $5,000 of accumulated income in the first 13 weeks. After 13 weeks, you can withdraw as much accumulated income (including educational assistance payments) as you wish.  However, there are no limits to withdrawals from the contribution portion as long as your child is attending school.

Bankrate.com blogger Jasmine Miller also writes about How to cash out your RESP. Because the government stipulates that financial institutions must follow “due diligence” to ensure RESP funds are being used for a child’s education your bank may want to see a copy of your child’s acceptance letter before releasing funds or they may take you at your word. Therefore she says it’s a good idea to keep all documentation and receipts.

The Investing for Me blog Withdrawals from RESPs notes that RESP withdrawals can generally be made to cover tuition, room and board, school supplies, computers and transportation as these are all eligible educational expenses under the Human Resources and Skills Development Canada (HRSDC) criteria. However, guidelines for withdrawals from a Group RESP account are governed by the plan’s contract or prospectus and group plans may have more restrictions than family or individual plans.

But what if your child doesn’t continue her education? Get Smarter About Money explains that if your child doesn’t continue her education after high school, there may be financial costs and tax consequences. But you have these four available options:

  1. Keep the RESP open – your child may decide to continue her studies later,
  2. Transfer the money to another beneficiary,
  3. Transfer the money to your RRSP,
  4. Close the RESP.

In Need to use an RESP this fall? Back to school starts now, Rob Carrick covers some of the same territory as the blogs noted above. However, he says one more consideration in filling out the RESP withdrawal form is where you want the money to go. You can have it sent to your chequing account, or your child’s account. He has the money from his son’s RESP paid into his and his wife’s joint account, and then he pays tuition and residence bills via Interac online.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.