How to Save for Education

How to Save for Education

Save for Education

You will hear over and over Save for Education, that’s because paying for education can be daunting, be it your own or your child’s education. Many people don’t realize that saving for education is possible if done right. As a general rule, you should start early. Starting early means you will have more saved up for your child’s education.

Registered Education Savings Plan

An RESP (Registered Education Savings Plan) is a good place to start. Open an RESP as soon as your child is born. So how does an RESP work? Well, a person, usually parents, make contributions to an RESP on a monthly basis. RESP’s don’t have an annual limit for contributions, however it cannot exceed $50,000 over life time. The government will contribute a maximum of $500 per year with a maximum lifetime payment of $7,200 until your child turn’s 17.

Canada Learning Bond

Another option to get a start on saving for your child’s education is through Canada Learning Bond. It is for children born after December 31, 2003 and whose family income falls under low income bracket.  If you qualify the government will deposit $500 in your child’s RESP and will continue to deposit $100 per year as long as you qualify.

Lifelong Learning Plan

If you want to save for education then there is Lifelong Learning Plan (LLP). Under this plan, you can withdraw funds for full-time education or training for yourself or your partner. You can access a maximum of $10,000 per year or a lifetime maximum of $20,000. When you withdraw from an LLP you have up to 10 years to repay into your RRSP.

Other Saving Options

If you’re already using the methods above and are looking for other options to save, the options below should be considered:

  • Tax-Free Savings Accounts

Start saving in a tax-free savings account. You will be saving tax-free with the option to withdraw money at any time. This money can be used towards your child’s education.

  • Informal Trust Accounts

Setup and informal trust account. Open an account at your bank and name the child the beneficiary. The account will be held until your child reaches the legal age of 18. There are some benefits of going down this path. Unlike RESP there are no minimum or maximum amounts to contribute. Another benefit is that your child will not have to pay taxes on money withdrawn as you are contributing after-tax dollars, you have already paid taxes on money deposited in the account. The only tax paid will be on the amount earned due to interest. Also, your child is not limited to using this money only for education, they are free to use it as they fit.

  • Ask your child to contribute

Ask your child to contribute to education fund. Summer jobs are a great way to get your child to start earning some money and putting a certain percentage of wages towards their education.

  • Take care of your own finances

Get your finances in order so you can look after your child’s education. Your ability to save for education for your child hinges on you as a parent being financially secure.

4 Budgeting Mistakes You Should Avoid

4 Budgeting Mistakes You Should Avoid

Budgeting is a great tool as long as you know how to avoid budgeting mistakes. It is easy to make mistakes if you are just starting with budgeting. That’s why it is important to know what budgeting mistakes are and how to avoid them.

Budgeting Mistakes

 

Tracking Expenses

It is important to keep track of your expenses on a daily basis. The whole premise of budgeting depends on your ability to keep track of your expenses and recording those expenses. Don’t become complacent and think of small expenses as unimportant, every little expense matters and needs to be recorded.

With smartphones these days keeping track of expenses should be a breeze. Just take a picture of your receipt as soon as you get it. This way you don’t have to worry about losing a receipt and you can simply pick up your phone and access your receipts.

Budgeting for the Unexpected

Always budget for the unexpected. You never know when you may need to spend on things like car repair or boiler breakdown. Your budget has to include an emergency expense plan. The best course of action when planning for emergencies is to make sure your account always carries a certain amount.

Ignoring your Budget

Building a budget is just a small step, the hard part is tracking your budget. Don’t forget about your budget until the end of the month. Be careful of your spending and refer to your budget on a daily or weekly basis. It better to realise you may overspend before it happens than after the fact. If you only refer to your budget at the end of the month you may realise that you have gone over your budget.

Building an over ambitious budget

Avoid building a budget that is too strict. Most likely your spending will fluctuate from month to month. Build your budget taking in to account these fluctuations in your expenses.

Be realistic with your budget. If you know you won’t be able to deliver on your budget then it defeats the purpose of your budget. A budget should not be a burden on your spending it should be the other way around, it should make your spending decisions easier. Allow some flexibility in your budget to allow you to get a better picture of your spending.

Avoiding these budgeting mistakes will help you stay committed to your budget, commitment is the key to achieving your financial goals.

 

 

Taming the Credit Card

Taming the Credit Card

Credit card debt is probably the most common debt problem people face. It is easy to get trapped in credit card debt and it isn’t hard to get one.

Credit cards are convenient and make it easy for us to buy things we can’t afford. But all we are doing is deferring the cost. The time of reckoning comes when we get our credit card statements. If you are in a situation where you are unable to pay off the full balance, you will be looking at high-interest charges. Interest charges can make it difficult to pay off the debt month after month, locking us in a vicious cycle of credit card debt.

There are two reasons why this may happen. The first reason is simply that you may not understand all the fees and charges attached to your credit card. This is simply carelessness on our part. It is important to fully understand the terms and conditions attached to any loan you take and credit card debt is no different. The second and probably the most common is to fall into the minimum payment trap.

Credit Card Fees

Every time you get a new credit card, you are sure to get a thick booklet with fine print. Do not ignore this information, you don’t read every word if you don’t have the time but at least go through the main points.

Here are a few important credit card conditions to note:

  • Interest Rates

    You should always know the interest rate you are paying on your balance. This can be a massive cost if you consistently find yourself in a situation where you are unable to pay the balance in full.

 

  • Grace Period

    This is basically the time you get to pay back the money without incurring an interest charge. Be mindful of this period especially if you are carrying a balance. As soon as your purchase crosses the grace period, it starts incurring interest.

 

  • Cash Advance

    Taking a cash advance from your credit card is one of the worst mistakes you can make when it comes to credit cards. First of all, there is no grace period when you take out a credit card cash advance. On top of that, you will have to pay a transaction fee. So a cash advance should only be used in emergencies.

 

  • Over limit charges

    Going over the credit limit can have consequences, there is usually an over-the-limit charge plus it can impact your credit score.

 

Minimum Payment

A lot of people look at their statements and pay the minimum required. This is a huge mistake. By only paying the minimum you actually end up paying more for your purchases due to the interest charged on your balance. Next time you are thinking about making a minimum payment, look at your statement it will tell you how long it will take you to pay off the balance by making minimum payments. It will shock you.

To avoid paying outrageous interest charges every month, always pay the full balance, and if you can’t then pay more than the required minimum.

Balance Transfer

I am not a big fan of this method but it could help if you are struggling with credit card debt. If you are paying interest on your balance every month, then transfer the balance from the card with a high-interest rate to a lower rate card. The reason I don’t always recommend this method is that there is usually a balance transfer fee. So before taking this approach have a look at the balance transfer fee and decide if it is worth it. If you are struggling with managing credit card debt, then this approach may help.

How to Get a Good Deal on Checking Accounts

How to Get a Good Deal on Checking Accounts

Checking Accounts

We all have checking accounts; it would be impossible to live our lives without one. While we all have one, many don’t pay much attention to it. Our carelessness makes it easier for banks to charge fees that we don’t notice. Ideally, you should have a checking account for easy access to cash to pay bills and expenses, keeping the remaining balance in higher interest-bearing accounts such as saving accounts. Keeping excess funds in a checking account serves no purpose as you are not likely to earn any interest.

Checking Account Basics

Banks always have some sort of checking account promotion. Some of the recent promotions I have seen offer a free TV or tablet. These offers can be enticing and it may seem like a good deal. Remember that there is no such thing as a free lunch. Banks would not give away freebies if they didn’t have anything to gain in return. By opening a checking account banks are hoping they can in return lock you in a personal loan or a mortgage. These days the interest you earn on these accounts is probably around 0.25% if not 0%. So the banks earn interest on your loans, you earn nothing on your deposits.

On top of this, banks usually charge a monthly maintenance fee, which may be waived for certain accounts if you maintain a minimum balance. These fees increase every year and the chances are you don’t even notice it, and even if you do, you are probably not going to do much about it.

Mistakes You Should Avoid

Don’t just walk into a bank and ask to open a checking account. Do some research before you walk into the bank. You will be offered accounts with low monthly fees that offer basic banking facilities or accounts with high monthly fees offering extras. The number of checking accounts each bank offers can be confusing. Basically, there are three different kinds of checking accounts available:

  • Accounts with low monthly fees that pay no interest.
  • Accounts that charge high monthly fees requiring a minimum balance but with low interest.
  • Basic checking accounts that don’t pay interest, charge lower monthly fees and have low monthly balance requirements.

So before opening an account you should know which category you fall into. There is no point in opening a high monthly maintenance fee account with all the extras if you are not going to take advantage of these extras.

Not paying attention to add-on fees can be costly. Some of these fees are:

  • Using your bank’s ATM.
  • Using another bank’s ATM.
  • Bounced checks.
  • Money transfers.
  • Money orders.
  • Falling below the minimum required balance
  • Certified checks.

You can avoid these fees by being aware of the conditions attached to your checking account. The best way to avoid these fees is to ask yourself, what is your expected monthly account balance, are you going to write any checks, are you expecting to use the ATM, and so on. Look at your bank statement from the last few months to get an understanding of the fees charged.

Shop Around

There are a lot of banks and they all want your business. To find the best deal you have to shop around and do your research. I have found Ratehub.ca to be a useful site when comparing bank accounts. The more banks you research, the better your chances of getting a good deal. Look for checking accounts that offer low fees and low deposit requirements. When shopping for a checking account you should have an idea of what are your expectations. Don’t ignore online banks, online banks are starting to offer some good deals and offer no monthly fee accounts that require no minimum daily balance. They may also offer no annual fee credit cards with cash back.

7 Money Saving Tips

7 Money Saving Tips

 Money Saving Tips

 Here are 7 money saving tips to get you started on the path to saving.

Set-up automatic savings 

Saving through automatic savings is an easy and convenient way to save. To set-up automatic savings, instruct your bank to take a certain percentage directly from your paycheck and deposit it in your savings account. It will be a little hard at first as you are effectively getting a reduction in your pay check but you will adjust to your new income over time. This way you are ensuring you save first before you allocate your paycheck towards expenses

Be Realistic

Don’t try to be over-ambitious and save an unsustainable amount. Start small and work your way to an amount you are comfortable with and can be maintained over the long-term.

Start Budgeting

Make a budget, if you haven’t done so already, and budget an amount for saving. Budgeting is a great money management tool and will help unlock savings that you can put towards achieving your saving goals.

Review insurance

Be ready to shop around when your car and home insurance are up for renewal. You may have gotten a good deal with your current insurer but that may not be the case anymore. Shop around and see if you can get a lower rate, you may be surprised how much you can save by being willing to switch.

Review your cable 

Do you still need cable? Does your cable package still make sense for you? With Netflix and other streaming services, you may realize that you no longer need cable. You can unlock significant savings by reviewing your cable package.

Review your landline

We all have cell phones and we carry them around with us everywhere. So do you still need that landline? Even if you need a landline there are cheaper options than using a traditional landline. VOIP is much cheaper with excellent call quality if you use the right service. There are a lot of options when it comes to VOIP and they are a lot cheaper than your traditional landline.

Make your own lunch

Instead of buying lunch every day consider making your own lunch. Take your leftovers for lunch the next day. This is a great way to save a little extra everyday.