The prescribed rate is determined by the Canada Revenue Agency (CRA) each quarter and applies to loans made during that quarter. The current interest rate used for low-interest loans is 3% as of Q1 2026.
It fell to 1% in 2020 for 2 years following the pandemic onset and was 1% as well for several years during the 2010s. As a result, lots of taxpayers took advantage of this low threshold and established loans that are still at that same low rate.
Repaying a spousal loan
You are not required to repay a spousal loan, though you are required to make the annual interest payments by January 30 to avoid income attribution. You may need or choose to repay the loan at some point.
The borrower can pay back the spousal loan principal using any source, including the investments purchased with the borrowed funds. The borrower can also use their income or other assets to repay a loan.
Selling investments purchased with the borrowed funds can trigger capital gains.
LoanFinder is moments away from showing your personalized loan matches
In under 60 seconds, get matched with a personalized list of loan providers based on your needs and approval likelihood. No SIN required.
Forgiving a spousal loan during your life
If you forgive a spousal loan during your lifetime, special tax rules called “debt-forgiveness rules” may apply to the spouse who borrowed the money. The borrower may have to reduce their non-capital or capital loss carryforwards, if they have any, by up to the amount of the debt forgiven.
Otherwise, they need to reduce the adjusted cost base for depreciable or capital property to increase the future capital gain on sale for these assets.
Any remaining forgiven amount is included in the borrower’s income as a capital gain in the year the loan is forgiven.
Article Continues Below Advertisement
Forgiving a spousal loan on death
A spousal loan is not required to be repaid or forgiven. In fact, it can remain outstanding for many years with the initial interest rate when the loan was made continuing to apply.
If the lender dies and the loan is forgiven upon their death, the debt forgiveness rules do not apply. Nor do the spousal attribution rules apply to income earned from assets purchased by the borrower with the spousal loan.
Summary
Spousal loans require proper documentation, tax reporting, and adherence to the annual interest payment rules.
There can be adverse tax implications if a loan is forgiven. Although a spousal loan does not need to be repaid, there may be cases where it makes sense to do so.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. and Objective Tax & Accounting Inc. in Toronto. He does not sell any financial products whatsoever.
The ACFB was introduced in July 2020, consolidating the Alberta Child Benefit and the Alberta Family Employment Tax Credit into a single program. The ACFB aims to improve the quality of life for children and support their well-being. (See similar programs in other provinces and territories.)
The ACFB is indexed to inflation, so the amounts increase every year. The ACFB benefit period runs from July of one year to June of the following year.
What are the Alberta child benefit payment dates for 2026?
The CRA issues ACFB payments quarterly, by direct deposit or cheque. The payment dates this year are:
February 27, 2026
May 27, 2026
August 27, 2026
November 27, 2026
You can also check CRA’s My Account for personalized benefit payment dates.
Who is eligible to receive the ACFB?
To qualify for the ACFB, you must meet all of the following criteria:
Be a parent of one or more children under 18
Be a resident of Alberta
File a tax return
Meet the income criteria
The best credit cards for families
Do I have to apply for the ACFB?
No, you do not need to apply for the ACFB. According to the Alberta government, “You are automatically considered for the ACFB when you file your annual tax return and qualify for the federal government’s Canada Child Benefit.” (Learn more about the Canada Child Benefit (CCB), including eligibility requirements and payment dates.)
The CRA will regularly reassess your family’s eligibility for the ACFB (for example, if you have another child, your benefit amount could increase). If you and your family have just moved to Alberta, you’ll be eligible for the ACFB the month after you become a resident.
How much is the Alberta child benefit?
Your adjusted family net income (from your previous year’s tax return) and the number of kids in your family determine your total benefit amount per year. The ACFB includes a base component and a working component.
Article Continues Below Advertisement
Base component of the ACFB
The ACFB’s base component is available to lower-income families with children. You do not have to earn any income to receive the base component. Depending on the number of children in your family, you may be entitled to the following amounts as your base component for the period from July 2025 to June 2026:
$1,499 for the first child
$749 for the second child
$749 for the third child
$749 for the fourth child (and each additional
If your adjusted family net income exceeded $27,565 in 2025, this base component is reduced.
Working component of the ACFB
In addition to the base component, families with adjusted net income exceeding $2,760 are eligible for the working component. The benefit amount for the working component increases by 15% for every additional dollar of income (up to the maximum benefit), encouraging families to join or stay in the workforce. You may be entitled to these amounts for the period from July 2025 to June 2026:
$767 ($63.91 per month) for the first child
$698 ($58.16 per month) for the second child
$418 ($34.83 per month) for the third child
$138 ($11.50 per month) for the fourth child
Once the adjusted family net income exceeds $46,191, the working component of the benefit is also reduced.
You can also use the Government of Canada’s child and family benefits calculator to get an estimate of the annual federal and provincial or territorial benefits you might be entitled to.
What counts as adjusted family net income?
Adjusted family net income is the amount the CRA uses to calculate your ACFB entitlement and determine when benefits begin to phase out. It’s based on line 23600 (net income) of your tax return.
If you have a spouse or common-law partner, the CRA adds both partners’ net incomes together to determine your family’s adjusted net income. This combined amount is then used to calculate your ACFB payment amount and assess whether reductions apply.
Adjusted family net income is reassessed every year after you file your tax return.
“Unfortunately, they ended up liking it,” Christine jokes. As her daughters got older, they signed up for additional dance classes. Fees increased over time and two years ago, her oldest daughter joined the studio’s competitive team. Christine now pays $731 per month for various classes plus several thousand dollars in competition fees, costume fees, and travel expenses throughout the year—not to mention the cost of swimming lessons and other activities.
While Christine and her husband have the means to cover these expenses, she knows that many others aren’t in the same position. “And when your kids are enjoying it, you don’t want to take it away.”
Current data is lacking, but a 2001 report from the Government of Canada indicated that 86% of Canadian children between the ages of 6 and 17 had participated in one or more extracurricular activities. A 2017 Ipsos report shared that 71% of Canadian parents felt that it was important to keep their kids busy with organized activities, and data from the same year suggested that parents pay an average of $1,160 per year on extracurriculars.
Perhaps most importantly, the same report found that 55% of Canadians felt financial strain due to their children’s extracurricular fees, and 32% of families were going into debt to fund these activities.
To learn more about how much families are paying and how they can make extracurriculars fit into their budget (or not), we spoke to Lianne Hannaway, a CPA and wealth coach in Toronto.
A look at the numbers
The cost of extracurricular activities for children varies wildly by type, location, and organization, and can also take many different forms: six weeks of art lessons, a summer baseball league, 10 months of dance classes per year or year-round swim lessons, for example. Some activities require payment in full at registration and others come with a monthly bill. Many competitive sports teams have registration fees on top of monthly costs, and parents are almost always responsible for purchasing equipment—not to mention add-ons like spiritwear, plenty of concession stand coffees, and the occasional pound of wings after a game.
Best savings accounts in Canada
Find the best and most up-to-date savings rates in Canada using our comparison tool
While the average family in Canada pays $1,160 a year for after-school activities, the cost can be substantially higher for those in high-cost athletics, activities with a travel component, or specialty programs—even more so if you have multiple children enrolled. Here are some current examples from Canadian parents:
“I pay around $5,500 a year for my 14-year-old daughter’s competitive volleyball team and $6000 a year for her competitive dance.” —Elizabeth in Hamilton, Ontario
“$1,375 per year for each of my two kids’ theatre lessons. And then we pay to see them perform!” —Sophie in London, Ontario
“$489 per month for competitive dance plus around $2,500 in added costs during competition season.” —Carrie in Burlington, Ontario
“$150 per month for cello lessons plus $500 a year to rent the instrument.” —Emily in Toronto, Ontario
“$243 per month for vocal lessons, $1,413 per year for student theatre, $840 in annual fees for jazz orchestra, and $2,800 for a summer music academy in Cuba.” —Maureen in Burlington, Ontario
“With three kids in competitive cheer, baseball, and hockey, I pay more for their activities than I do for my mortgage when factoring in travel, hotels, for tournaments, etc. We paid for 40 hotel nights in 4 different provinces in 2025 alone.” —Amanda in Ottawa, Ontario
“$10,000 a year for competitive dance including lessons, competitions, costumes and other fees.” —Caitlin in Toronto, Ontario
“Our son made a rep hockey team and we ended up saying no because the registration fee alone was $3,000. He’s seven!” —Annie in Burlington, Ontario
Dealing with pressure—and sticking to what you can afford
Putting your kids in extracurricular programs isn’t just about keeping them busy after school or nurturing their talents. For many parents, there’s an underlying pressure to provide exposure to a diverse array of experiences, giving your children valuable enrichment experiences and/or helping them keep up with their peers. That pressure can lead to excessive spending—especially if your kids fall in love with a high-cost activity.
Article Continues Below Advertisement
Whether your child is into music, dance, sports, or art classes, Hannaway notes that these activities have to fit into your family’s budget. “Saying ‘yes’ to an activity that will create financial stress is not a gift to your children,” she emphasizes. This doesn’t necessarily mean saying no to extracurricular programs; more so, Hannaway suggests being choosy about what form the activity takes.
“When your kids are young—under 12—keep it local and exploratory,” Hannaway suggests, noting that as your kids get older and hone in on their passions, you may want to invest more in a specific activity. But there’s no need to join an expensive sports team with a travel component when your child would also enjoy playing for a local team with significantly lower costs. Unless they’re the next Sidney Crosby, Hannaway says, house league will let them enjoy the same sport at a more affordable price point. “The idea isn’t excellence; it’s exposure. And the cost has to be in line with your financial reality.”
Affordable options and savings tips
Once you know how much rep hockey or competitive dance costs, it can be hard to believe that affordable extracurricular programs exist—but fortunately, they do.
If you’d like to enroll your kids in programs that don’t break the bank, start by exploring what’s offered through your local library and/or community centre. There may be weekly or drop-in programs including dance, gymnastics, art, coding, and more. City-run swimming lessons are far more affordable than lessons at private pools, and your community may have youth clubs that are free or involve minimal fees to join. Another low-fee option is joining the Beaver Scouts or Girl Guides of Canada, which typically costs less than $300 for the entire year. Older kids can also join school-based sport or dance programs for an enriching, team-building athletic experience that doesn’t come with a big monthly bill.
If your child is registered in more expensive activity options, there are several ways to lower your costs, Hannaway says. Keeping activities local will always cost less. Buying secondhand equipment is a major cost-saver, and equipment swaps are an excellent opportunity to size up without paying much (or anything). Many youth teams and clubs hold fundraisers to lower costs for families, and some will lower your fees if you volunteer within the organization.
If your kid is dedicated to an activity that’s slightly out of your budget, there are ways to get creative. “You can redirect gift giving from grandparents,” Hannaway suggests. “It’s a real game-changer if instead of buying toys, the grandparents give a hockey stick, for example.” She adds that when this happens, it often encourages grandparents to attend games because they’ve invested in the activity. This adds to your child’s support network in more ways than one.
A great childhood doesn’t require a huge price tag
As parents, we all want the best for our kids—but that doesn’t mean putting yourself into debt to avoid disappointment or keep up with the Joneses. Simply put, if an activity is not within your means, it’s not the right call for your family. Instead, do the best you can do within your budget, and remember that unstructured play and downtime are beneficial for kids, too.
“Guilt is the #1 enemy of good financial decisions,” Hannaway asserts, encouraging parents to create financial boundaries and stick with them. “When an expense doesn’t fit into your family’s financial reality, it’s a great opportunity to teach kids that financial decisions involve trade-offs. Kids can handle the truth. Share your financial wisdom with them. It’s not deprivation—it’s a life lesson.”
Neglecting to plan your inheritance is a bit like leaving your garden unattended for a few seasons. What starts as a minor oversight can quickly turn into a jungle of complications. Shockingly, two-thirds of Canadians haven’t put their estate plans in writing, according to a 2024 survey by IG Wealth Management, despite an expected $1 trillion in assets set to be transferred via inheritances in the next decade.
When a significant sum of money lands in the lap of someone who didn’t earn it during their lifetime, it can lead to a host of challenges. Financial mismanagement, family discord and even legal battles can arise. Inheritors might feel overwhelmed, unsure of how to handle their sudden wealth, which leads to anxiety and poor financial decisions. As the saying goes, “Easy come, easy go.”
The pitfalls of inadequate inheritance planning
Without proper planning, wealth transfer can lead to several challenges for your heirs:
Risk of fraud and exploitation: Inexperienced heirs can become targets for financial scams and exploitation. Falling victim to such schemes can lead to significant financial losses, jeopardizing the inheritance intended to support their future.
Family disputes: Ambiguous inheritance plans can cause significant conflicts among family members. Clear, well-documented plans are crucial in preventing misunderstandings and ensuring that wealth is distributed according to the benefactor’s wishes.
Tax Implications: Unplanned wealth transfers can incur substantial tax burdens, reducing the overall inheritance value. Strategic planning can help mitigate these taxes, preserving more wealth for the beneficiaries. Proper estate planning can save heirs from unexpected tax liabilities and ensure a smoother transfer process.
Key considerations for transferring wealth
To avoid these pitfalls and ensure a smooth wealth transfer, parents and grandparents should consider the following strategies:
Clear communication: Talk openly with your children and grandchildren about your plans. Surprise inheritances can feel like a windfall, but they can also bring confusion and stress. A candid conversation ahead of time can prepare them mentally and emotionally for the responsibilities that come with managing wealth.
Structured distribution: Rather than a lump-sum transfer, consider staggered distributions or trust funds. This method can help reduce the risk of financial mismanagement. Setting up a trust can ensure your heirs receive funds in a controlled manner, reducing the temptation to splurge.
Education and financial literacy: Equip your heirs with the knowledge they need to manage their inheritance wisely. Financial literacy programs or meetings with a financial advisor can be invaluable. Well-informed individuals are more likely to make prudent financial decisions.
Supporting the next generation
When wealth is transferred, so too is the responsibility of managing it. Providing support for your heirs can make all the difference. Here are a few ideas to help:
Comprehensive guidance: Schedule regular meetings with a financial advisor to review the inheritance’s management and address any concerns or questions. This helps ensure that heirs stay on track with their financial goals.
Recognize inheritance grief: “Inheritance grief” refers to the emotional and psychological challenges that heirs may experience when they receive a significant inheritance. It can manifest in various ways, including mourning the loss of the loved one and the changes that come with inheriting wealth. Emotional support, financial education and careful estate planning can help heirs navigate their feelings and responsibilities effectively.
Communicate the family financial plan: I know that I mentioned communication already, but I cannot overemphasize the importance of this! Develop a family financial strategy that includes goals for wealth management, charitable giving and future investments. This plan can serve as a road map for heirs to follow, promoting responsible financial behaviour and long-term planning.
Don’t leave it too late
Inheritance planning might not be the most exciting topic, but it’s essential to ensure your legacy is preserved and appreciated by future generations. By addressing the challenges head-on and providing the necessary support while you are still capable of doing so, you can help your heirs navigate their inheritance with confidence and wisdom.
Next time you’re tempted to delay those estate planning talks, remember this: a little planning now can prevent a whole lot of heartache later. And who knows? It might just be the most rewarding conversation you’ll ever have.
Debbie Stanley is an estate and trust professional, and CEO of the estate firm ETP Canada. She is a writer, speaker and regularly featured guest on Zoomer Radio.
The act of adding a name to a property itself does not give rise to capital gains tax. There’s a distinction between legal ownership (whose name is on title) and beneficial ownership (who technically owns the property). If only legal ownership changes, and not beneficial ownership, there may not be a tax event.
For example, an elderly parent might add their child’s name to their bank account or to the title to their home. They might do this based on the perception that it will simplify dealing with the assets as they age, or in an attempt to avoid probate tax. In these situations, a power of attorney or similar estate document (depending on the province or territory) may be better. The asset may not fall outside of the estate and avoid probate if beneficial ownership remains with the parent. There can also be risks to adding a child’s name to title, including creditor issues if the child is sued, family law disputes if the parents divorce, and elder abuse given the children can access the asset.
Was there a deemed disposition?
In your case, Flo, it sounds like your husband intended to partially dispose of the property. Did he document this specifically with a lawyer, or did he just add your daughter’s name to the rental property? Is she now receiving half the rental income?
A true intention to transfer results in a deemed disposition of one-half of the property at the fair market value. It’s equal to selling part of the property, with tax payable when your husband files his tax return next year.
Dealing with the increased capital gains inclusion rate
It seems your husband added your daughter to the property title because of the increase in the capital gains inclusion rate on June 25, 2024.
Beginning on that date, the inclusion rate for individuals rose from one-half to two-thirds for a capital gain of $250,000 or more in a single year. This means two-thirds of the capital gain is taxable instead of just one-half (as was the case prior to June 25). It’s only the capital gain in excess of $250,000 that is taxable at the higher rate. (For corporations and trusts, the inclusion rate is two-thirds for all capital gains.)
You mention, Flo, that this was done for estate planning purposes. I assume you intend to hold the property for the rest of your lives. If that could be many years, it may not be advantageous to accelerate the payment of capital gains tax. Some of the capital gain will still likely be subject to the higher inclusion rate—no matter what—and paying tax earlier than you need to could be disadvantageous.
I’m raising this not as a criticism, but because you may still be able to reconsider, if you haven’t specifically documented your intention and you simply added your daughter’s name to the property title. You should do some tax calculations with your accountant and discuss the documentation of the transfer with your lawyer.
The RESP was first introduced in 1974 as a tax-deferred savings vehicle for a child’s post-secondary education. While it’s typical for parents to open an RESP for their children, anyone can open one for any child, and anyone can contribute to the account. When it comes to RESPs, three key terms to know are “the subscriber” (typically the parents or a guardian), “the beneficiary” (the child), and “the provider” or “promoter,” the account-holding financial institution or professional.
The investments you can hold in an RESP are the same as those in an RRSP, such as bonds, stocks, mutual funds, guaranteed investment certificates (GICs) and cash. The difference between an RESP and other registered accounts is the ability to earn government grants on annual contributions, known as the Canada Education Savings Grant (CESG), which is worth up to $7,200. Rick Kenney, CFA, CIM, FCSI, the chief compliance officer at Embark Student Corp., says, for example: “If you contribute $1,000, you get 20%—another $200—in a grant. We term that as ‘free money’.”
This “free money” is calculated as a 20% match on annual contributions, up to a maximum of $2,500 per year (for a grant of $500)—but there is no annual contribution limit so long as it doesn’t surpass the lifetime RESP contribution limit of $50,000 per beneficiary. To get the full $7,200 in CESG, a family would need to contribute $2,500 every year for 14 years, plus $1,000 in the 15th year.
Low-income families with one to three children earning $53,359 or less are eligible for an additional $2,000 per child through the Canada Learning Bond (CLB), whether or not they make any personal contributions. (For families with four children, the adjusted income level is $60,205, and for those with five children, it’s $67,079). Parents of more than five children can call the federal government support line to inquire about their adjusted income level: 1-800-622-6232.
The RESP withdrawal rules
By now, you’re probably wondering, “Who can withdraw?” “How do I withdraw?” “What are the withdrawal limits?” and “What can RESP funds be spent on?” Here’s the nitty-gritty on RESP withdrawal rules. Note that RESP withdrawals are payable only to the subscriber (the person who opened the account), who can then give them to the designated beneficiary (student).
There are three forms of withdrawals:
Post-Secondary Education Payment (PSE): This simply returns the original contributions to the subscriber (parent or guardian), tax-free.
Educational Assistance Payment (EAP): This is the most beneficial withdrawal method, as it includes investment earnings, government grants and growth. However, EAPs are taxed in the student’s hands, usually when they earn too little to owe income tax in most cases—or they pay very little.
Accumulated Income Payment (AIP): AIP, used when a child is not enrolled (and doesn’t intend to enroll) in a post-secondary program,refers to the interest or growth from the RESP not used by the beneficiary as an Educational Assistance Payment (EAP). AIPs are typically paid to the subscriber and are subject to income tax of the subscriber plus an additional 20% (or 12% for those in Quebec).
To avoid this tax burden, it’s recommended that subscribers withdraw EAPs first, and online tools are available to help. The remaining investment growth that is not used as EAP becomes an AIP and is taxed at the subscriber’s marginal tax rate.
For example,if your parents contributed $2,500 annually for 10 years, they’d have contributed $25,000. With government grants and investment growth, let’s estimate that your RESP might have grown to $40,000. When you attend university, your parents can withdraw the initial $25,000 (PSE) tax-free. The remaining $15,000 (EAP) is considered the student’s income and taxed accordingly. If any of the $15,000 remains unused after graduation, it becomes an AIP and is taxed in the parent’s hands.
The joys of these animal companions, however, don’t come cheap: pet care costs have increased 6% to 8% annually over the past few years. On average, dog owners spend between $965 and $4,020 per year on their pup, while cat owners have it a little easier, at between $930 and $2,400 per year, according to pet-sitting app Rover. Between vaccinations, spaying/neutering, routine check-ups, and illness or emergencies, the costs of vet visits can start to rival your mortgage payments.
While inflation has had an impact on pet-care costs—as it has on virtually everything else we pay for in life—it’s not the only factor at play. The landscape of veterinary care has changed in recent years, largely thanks to staff shortages, the involvement of big corporations—in recent years, many independent clinics have sold to private equity firms—and increasingly sophisticated equipment and treatments. Here’s why you’re paying through the nose to keep your beloved four-legged friend healthy—and how you can reduce those costs a little.
Why is veterinary care so expensive?
Image by Freepik
There’s a lot that goes into animal health care. If your pet has been injured or simply isn’t feeling well—they’re uncharacteristically lethargic, say, or not interested in food—a battery of tests may be required to pinpoint the issue and determine care. X-ray and ultrasound machines, lab equipment and other vet tools have become more advanced in recent years, and as clinics invest into them, they have to charge more to recoup those costs.
Treatments can be pricey as well. Thanks to our publicly funded health care system, Canadians aren’t used to being confronted with the costs of medical care, so a several-thousand-dollar bill for chemo or surgery for your golden retriever can be a shock. But treatments for animal illnesses are often the same or very similar to human ones, so the costs are similar, too. Supply chain disruptions, coupled with a limited number of drug distributors, have led to higher medication prices as well.
And, like everyone else in the country, vets have seen their expenses rise due to inflation. Rents are higher, as are interest rates on loans, property taxes, insurance, utilities and maintenance fees. Vet businesses are feeling the pinch just like the rest of us, and they need to cover their basic running costs.
Another issue is staff shortages. There were barely enough veterinarians and veterinary technicians to go around pre-2020. Then, during COVID-19 lockdowns, pet ownership shot up, leaving many clinics struggling to cope with patient demand. There’s hot competition for potential staff, and one way to lure new talent is by offering higher compensation—that cost often gets passed on to pet parents. Let’s not forget there are clinic support workers who keep everything going, such as receptionists and cleaners; they need fair compensation, too.
One of the biggest factors in the increase in vet bills is that many clinics have been bought up by large corporations over the past few years at surprisingly high prices—sometimes as much as 30 times the clinic’s annual sales. These corporations tend to be more driven by profit than independent clinics and often pressure vets to increase billing or rates so they can plump up their investment. As well, with the high interest rates of the past two years, their new acquisitions have been costing them more than they anticipated, adding even more impetus to raise fees.
Watch: Is pet insurance worth it?
How can you save money on vet care?
“An ounce of prevention,” well, you know the rest. It’s easy to just not worry about your pet’s health if they seem fine and happy, but being proactive now could save you a hefty bill down the road. Ensuring they eat healthy, get plenty of exercise and all the necessary shots and routine check-ups could help you prevent illness—or catch it at an early stage—and avoid potentially expensive treatments.
Be sure to shop around animal clinics before settling on where to take your pet. Rates can vary significantly, so it’s worth calling several spots to compare prices. Such differences aren’t necessarily random—the fees might include different things, such as bloodwork and pain medication, and some clinics have newer or better equipment or just pay higher rent. There are also lower-cost spay/neuter and vaccination facilities that offer a more basic (but still safe and adequate) service.
Understanding the tax impact of more affordable care
Here’s the problem: your child-care expense deduction will decrease if you pay less to your child-care provider. As a result, your taxes payable will likely increase, depending on your income level. A reduced child-care expense deduction will also increase the net income on your tax return. This is the figure your refundable tax credits, like the Canada Child Benefit (CCB) are based on. These important monthly benefits, therefore, could shrink.
To understand this fully, take a look your tax return from last year. The child-care expense used as a deduction is found on line 21400 after being calculated on form T778. Net income is at line 23600. That important line is used for government “income testing” for a number of provisions on the return, including refundable tax credits like the Canada Child Benefit, the Canada Worker’s Benefit and the GST/HST Credit. It will also determine how much OAS (Old Age Security) seniors will get, or whether employment insurance (EI) benefits will be clawed back. Just as important, non-refundable tax credits, like the spousal amount, may be affected.
When your net income goes up because of your lower child-care expenses, these benefits are reduced, unfortunately.
Invest to offset a reduced net income
There is some good news for astute investors, howeve,. To keep your family’s net income low despite the reduction in your child-care expense deduction, make an RRSP (registered retirement savings plan) contribution. The resulting RRSP tax deduction reduces your net income and your taxable income and, in the process, works to increase income-tested refundable and non-refundable tax credits too! Check out how much RRSP room you have on your notice of assessment from the Canada Revenue Agency (CRA) to make the contribution.
The same effect occurs if you can claim a deduction for contributions made to the first home savings account (FHSA). An annual deduction of up to $8,000 may be claimable.
Maximize your child-care claim
The final way to shore up the tax benefits from your child-care expenses is to make sure you claim all of them and to your best tax advantage.
Child-care expenses are often missed entirely by parents. If this has happened to you, did you know you can go back and adjust prior filed returns to make that claim and receive the tax-credit benefits and tax refunds you missed? Especially if you are a first-time filer, be warned, however, that the claim for child care is complex and often audited. Be prepared to provide receipts to justify your claim.
It’s also important to know that the spouse with the lower income is the one that must claim child-care expenses, except in certain defined circumstances: when the lower earner is unable to care for the children due to a mental or physical infirmity, is in full time attendance at a qualifying school, or in hospital or incarcerated for at least two weeks, for example. Another exception is when there is a breakdown in the conjugal relationship for at least 90 days, but a reconciliation takes place within the first 60 days of the year. The usual $5,000, $8,000 or $11,000 maximum amounts claimable by the higher earner may be reduced, however, with a maximum weekly calculation.
Spring 2024 outlook on grocery food inflation for Canada
The outlook for food and beverage manufacturers this year is more positive than last year, FCC said, though some sectors still face headwinds amid elevated interest rates and tighter household budgets. “However, population growth and stabilizing—in some cases, falling—input costs are providing optimism for margin improvement for 2024.”
The organization’s annual food and beverage report offers up forecasts for consumer spending, as well as specific food items such as sugar and flour.
What is Canada’s inflation on food?
Canada’s annual inflation rate was 2.8% in February, and grocery prices were one of the main factors pushing it lower. Grocery inflation was 2.4% that month, down from 3.4% in January, as the cost of many items declined year over year. However, slowing inflation doesn’t mean prices overall are dropping. Statistics Canada noted in its latest inflation report that between February 2021 and February 2024, grocery prices rose 21.6%.
How are Canadians dealing with rising food prices?
As they grapple with higher prices, not just on food but on shelter and other daily costs, Canadians have been trying to cut back their spending on food and beverages, FCC said. They have been buying more items on sale, gravitating toward less expensive brands, buying more canned and frozen foods, shopping more at discount retailers and simply buying less food.
“Many consumers say the impact of high interest rates are just beginning to affect their spending,” FCC said.
As shoppers have become more price sensitive, FCC said processors have been responding by modifying package sizing and substituting less expensive inputs.
Canadians have also been cutting back on alcohol, the report said. It forecasts a decline in alcohol sales and manufacturing volumes this year.
Will food prices go down?
The report said some food products are expected to go down in price this year, such as flour, after a sharp increase over the last couple of years. This will translate to lower bakery and tortilla manufacturing selling prices by the end of the year.
While imperfect, the $10-a-day system has been widely applauded for making child care more affordable and equitable for more Canadians. And it looks like it’s here to stay, as legislation that commits the federal government to funding the system long term is poised to become law. However, the national daycare plan is facing some big challenges, including a still-limited number of spaces and the widely reported closures of child care centres that can’t cover their costs.
“Supply is still insufficient to meet the urgent demand for affordable child care spaces,” says Morna Ballantyne, executive director of Child Care Now, a group that advocates for publicly funded child care. “The early learning and child care sector is undergoing major change.”
Families who were fortunate enough to secure a subsidized spot for their child and receive rebates for their fees are estimated to save thousands per year: as much as $6,780 annually per child in Nova Scotia and $9,390 annually per child in British Columbia, for example. If a daycare centre were to pull out of the program, or even shut down, these families would be left scrambling to find affordable child care.
How $10-a-day daycare works
The goal of the national child care plan is to provide affordable and inclusive care for all families. To make this happen, provincial and territorial governments made funding deals that have rolled out in stages, starting with daycares that elected to join the program and freeze their fees in March of 2022. This was followed by a series of refunds to parents via a child care fee subsidy (whose details vary by province and territory). Currently, CWELCC-participating daycares continue to reduce their frozen fees, with a plan to get the cost down to $10 per day by 2026.
Why some daycares are pulling out of the program
Operators in multiple provinces are threatening to pull out of the system—and some have already gone back to their old private fee structure or closed their doors. They say the federal-provincial agreements, which limit the fees they can charge, are not providing enough funding to cover their costs. Daycares that opted in to the program at the outset are still receiving funding coverage to match their revenue at that time, but as inflation neared an annual average of 4% over 2023, the governments’ top-up of less than 3% has been insufficient. As a result, many daycares have faced a shortfall, and some say they have been saddled with unsustainable levels of debt.
A group of operators in Alberta, led by the Association of Alberta Childcare Entrepreneurs, held a series of rolling closures in early February to bring attention to the issue. The Alberta government has since promised changes to the funding model, including affordability grants and a streamlined payment process for daycare operators.
In Ontario, under the province’s current funding model, the YMCA, the largest licensed daycare provider in the province, says it’s running at a loss of $10,000 to $13,000 per year for each infant in its care. The YMCA has said it hoped to see a new funding formula in the fall of 2023, but that hasn’t materialized. A spokesperson for Ontario Education Minister Stephen Lecce has said the province is pushing for more federal money.
In other parts of the country, particularly in big cities where the cost of living is high, the story is much the same. An analysis by Cardus, a public policy group, said the rollout of child care expansion programs in British Columbia, Saskatchewan and New Brunswick have all been slow to start and have had underwhelming results. In its first year, New Brunswick only created 300 new child care spaces, which is barely a dent in its five-year target of 3,400 additional spots. While the funding to cover operating costs—which have been on the rise due to inflation—is a major piece of the puzzle in many areas, it’s just part of the problem. Staffing daycares is the other issue.
While younger investors tend to be more optimistic about and willing to invest in crypto, according to the Chartered Financial Analyst (CFA) Institute, their family members may have concerns about it—especially given the fall of a few major crypto firms, including FTX—last November, its founder was found guilty of stealing from customers. Crypto is a highly volatile asset type with wide-ranging risks, so it can be a divisive topic. How can you have conversations about crypto with your family members so that both sides feel comfortable?
Before you explain cryptocurrencies to anyone, make sure you understand them yourself. Here’s a quick guide.
1. Start with crypto basics
Start with the basics: Crypto is both an asset and a new technology. It is meant to be a digital currency. (Some companies and contractors will get paid in bitcoin, for example.) However, at the moment, it’s more of a tradable asset, whether on crypto exchanges or as part of crypto exchange-traded funds (ETFs) listed on stock exchanges.
2. Explain how it’s used
Then, you can get into the more complicated bits. Cryptocurrencies are built on blockchain technology, which is a digital ledger (your parents should know what that is). It logs the ownership of the crypto, and it’s spread across a network of computers that permanently and transparently records transactions. No one can alter the blockchains, and anyone can view them. See, simple enough.
3. Be open to their questions
Don’t get flustered when questions come up. “Why the need for new money?” they might ask. What sets cryptocurrencies apart from traditional fiat currencies, besides being virtual, is that they’re not backed by a central bank or government. Explain that cryptocurrencies carry both benefits and risks. Crypto transactions can be faster and cheaper, but if something goes wrong—say, your digital coins end up in the wrong wallet—there’s no one to intervene (get back your money). And investors treat them more like assets than as actual currencies.
Your parents might also ask about the differences between virtual coins. There are thousands of cryptocurrencies on the market, available via crypto exchanges and crypto trading platforms. Keep it simple by explaining that the three largest coins by market capitalization are bitcoin, ethereum and tether. (We cover more questions below.)
4. Be aware (and communicate that you’re aware) of its volatility and risk
For your own financial literacy and credibility with the fam, you need to know that crypto isn’t instant growth. There may be stories of investors who “got rich quick,” but there are many more stories of those who lost their money. If you express you understand how serious investing in crypto is, it’s more likely your parents will trust your knowledge. Taub cautions that cryptocurrencies are “alternative” investments, and even within that broad category, they are considered extremely volatile and high-risk. And Simmons suggests researching Canadian crypto trading platforms and demonstrating how to use one. Showing your parents how you plan to invest may help ease any anxiety they feel about crypto scams, which are common (more on this below). Read our tips on choosing a crypto trading platform.
5. Explain how you will (and won’t) use crypto
Once you’ve started a family dialogue about crypto, Taub says, “As with any investment, the conversation should be about how it fits into your existing portfolio(s) and how it aligns with your goals and investment objectives, your time horizon and your appetite for risk.”
However, problems with the rollout have left many students and their families frustrated with fewer students applying overall. As of the last tally, nearly 4 million students have submitted the 2024-25 FAFSA form so far. Â
Thatâs a fraction of the 17 million students who use the FAFSA form in ordinary years, according to the U.S. Department of Education.
Higher education already costs more than most families can afford, and college costs are still rising. Tuition and fees plus room and board for a four-year private college averaged $56,190 in the 2023-2024 school year; at four-year, in-state public colleges, it was $24,030, according to the College Board.
For most students and their families, the amount of financial aid offered and the breakdown between grants, scholarships, work-study opportunities and student loans are key to covering the tab.
This year, those award letters will likely to look a lot different â and those changes open the door for families to ask for more college aid, experts say.
âEvery student should anticipate doing an appeal this year,â said Bethany Hubert, a financial aid specialist with Going Merry by Earnest.
The simplified form now uses a new calculation called the âStudent Aid Indexâ to estimate how much a family can afford to pay.
Under the new system, more low- and moderate-income students will have access to federal grants, but the changes will reduce eligibility for some wealthier families.
And, as part of the FAFSA simplification, families will no longer get a break for having multiple children in college at the same time, effectively eliminating the âsibling discount.â
The new FAFSA âis going to benefit low-income students, less so for wealthier students â thatâs kind of the redistribution we would want, to some extent,â said Menaka Hampole, assistant professor of finance at Yale School of Management.
However, as a result, some families may find their financial aid award letter does not live up to their expectations, especially if there are other siblings in college.
“There is a good caseâ for making an appeal, Hampole said. âThe question is whether people know that they can.”
âIf the new FAFSA impacted you, for example, you no longer qualify for the sibling discount, colleges do have the ability to take that into account,â Hubert said. âThat is something families can reasonably ask for.â
âThe first step is always going to be reach out to the financial aid office and ask them about their process,â Hubert advised. Then, start preparing your appeal.
If there are need-based issues beyond what was noted in the financial aid paperwork, such as another sibling in college or changes in your financial circumstances, that should be explained to the school and documented, if possible.
Alternatively, if the financial aid packages from other, comparable schools were better, that is also worth bringing to the schoolâs attention in an appeal.
âWhen you combine that with a student showing a lot of interest, sometimes a school will be willing to adjust the financial aid package, particularly at private schools,â said Eric Greenberg, president of Greenberg Educational Group, a New York-based consulting firm.
âMost people would not even think of doing that,â he added, but âvery often itâs helpful to appeal.â
The federal government introduced the RESP nearly 50 years ago to help families save for their kids’ post-secondary education. The big draw for parents: Investment growth inside an RESP was (and still is) tax-sheltered. You can contribute up to $50,000 per child into an RESP, and the account can stay open for up to 35 years.
In the years since the RESP was launched, the government has added grant programs to further encourage families to save.
RESP grants
Canada Education Savings Grant: The CESG is a matching grant. For the “Basic CESG,” the government will match 20% of your contributions, up to $500 per year. To get the full $500, you would need to contribute $2,500 in a year. If your family’s adjusted income is below a certain amount, you can also receive the “Additional CESG,” which is an extra 10% or 20% on your first $500 per year. The CESG’s lifetime maximum, including any Additional CESG, is $7,200 per child.
Canada Learning Bond (CLB): Kids born in 2004 or later whose family’s adjusted income is below a certain threshold could get $500 the first year they’re eligible, plus another $100 each year until they reach age 15, if they continue to qualify (based on income). To apply for the CLB, you don’t need to make a personal contribution. The CLB’s lifetime limit is $2,000 per child. This grant is retroactive and kids can still be eligible up to the day before they turn 21.
British Columbia Training and Education Savings Grant (BCTESG): For B.C. residents only, this grant adds $1,200 to an RESP. You must apply between a child’s sixth and ninth birthdays.
Quebec Education Savings Incentive (QESI): For Quebec residents only, this grant matches 10% of your annual RESP contribution, up to $250. The QESI’s lifetime maximum is $3,600.
Use an RESP calculator
The RESP is a powerful savings tool because of the CESG and other government grants. To see how they can boost the growth of your savings, try out different scenarios using an RESP calculator. You can change the variables—including the child’s age, initial deposit, monthly contributions and projected rate of return—and see how your savings might stack up against the cost of post-secondary school.
How to open an RESP account
To start saving for your child’s college or university expenses and take advantage of government grants, you can open a plan with an “RESP promoter”—the government’s term for a financial institution that offers RESPs. You can open an individual plan or a family RESP, for multiple kids.
Embark, a Canadian fintech focused on education savings and planning, helps families maximize their savings and government RESP grants. It also manages RESP investments, using a “glide path” approach tailored to your child’s age. So, the closer they get to starting college or university, the more conservative the approach for managing the investments.
More about RESPs:
This article is sponsored.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.
Jaclyn Law is MoneySense’s managing editor. She has worked in Canadian media for over 20 years, including editor roles at Chatelaine and Abilities. Jaclyn completed the Canadian Securities Course in 2022.
When it comes to life insurance, specifically, reviewing and potentially updating policy and beneficiary information should be the first step post-divorce. Most people who are married name their spouse as their primary beneficiary. Whether or not the divorce is contentious, they will likely want to update this to a new beneficiary. However, depending on the divorce agreement, there may be circumstances where the former spouse remains a beneficiary, as a way to provide financial support on the expenses they agreed to contribute towards.
Canadians can also name their children or other dependents as the primary beneficiary or beneficiaries. If the beneficiary is a minor, you will need to appoint a trustee, who would manage the funds of the trust until the child is old enough to do so.
You might also need to make further adjustments to the policy. It’s helpful to consult the professionals who are supporting you through your divorce, whether that’s your licensed life insurance advisor, estate planning specialist, accountant or lawyer. Some things to consider include:
1. Who will pay for the policy going forward?
To ensure your family’s insurance coverage stays intact, set clear expectations on who will pay for the policy. It’s worth noting that the owner of the life insurance policy does not need to be the same individual as the payor.
2. Is your insurance coverage sufficient?
After reviewing your financial obligations and identifying expenses that your former spouse is covering (partially or completely), does your life insurance policy provide enough coverage for your family? You may need to discuss purchasing additional temporary coverage if your debt load has increased. This applies to your critical illness and disability insurance policies, as well.
3. Is there cash value in the policy?
Some permanent policies accumulate cash value over time. The owner of the life insurance policy may decide to leverage the policy’s cash value as a loan for emergency cash-flow purposes or to fund a planned expense. The caveat is that the death benefit of the policy is generally reduced by that policy loan until the money is paid back. Whole life insurance policies typically have consistent premiums and generally guaranteed cash value accumulation, while universal life insurance offers flexible premiums and death benefits but with fewer guarantees. Universal life policies allocate a portion of your premiums towards the life insurance itself, while the remainder is divided between savings and investment components, which must be regularly monitored to ensure they are performing. Depending on the policy and its duration, the cash value of a life insurance policy may need to be considered as an asset in the divorce agreement.
In addition, reviewing your policy is important to keep track of payment cycles or any other conditions that may prevent your policy from coming into effect when needed.
Get personalized quotes from Canada’s top life insurance providers.All for free with ratehub.ca. Let’s get started.*This will open a new tab. Just close the tab to return to MoneySense.
Step 3: Turn your focus to your future
Once you’ve sorted out your financial obligations and reviewed your insurance policies, it’s time to look forward. Here are a few steps that can help protect your future as well as the future of your beneficiaries in the case of a divorce:
A policy that insures your ex-spouse can be kept in force voluntarily, or you can get new policies to help provide financial protection for your dependents. This is especially important if you’re counting on your ex-spouse’s support payments for living expenses.
Recent divorcé(e)s may also want to consider disability and critical illness insurance. Life takes lots of unexpected turns, and these types of insurance can help ease your mind so you can focus on your family and/or recovery.
If a court orders it or if it’s integrated into your divorce agreement, a policy can be required to remain in effect as part of a divorce settlement or as part of a spousal or child support agreement.
A new policy may be issued to replace an existing policy because it better meets the needs of both parties.
Secure your own separate life insurance policy to ensure your children or other dependents are financially protected, especially if your ex-spouse’s financial situation isn’t stable. Life insurance coverage generally lapses when payments are missed.
Don’t be afraid to ask for help
You don’t have to do all of this alone. If you need help to organize your finances, divide up assets (including intangible ones like a life insurance policy) or explore new options, don’t hesitate to consult a professional. They can provide guidance and ensure you have proper protection for your family.
Love also means security. Yet, surprisingly, half of Canadians don’t have a will, according to a 2023 Angus Reid poll. Having a one is gifting family a safety net—a well-defined plan can guide loved ones through the financial complexities that often accompany the loss of a family member.
In the event of your passing, a detailed will eliminates the guesswork, ensuring your family is taken care of, and it minimizes potential conflicts over your assets. With solid plans in place, your family isn’t left grappling with uncertainty about how to navigate the intricacies of your estate.
You will need to designate beneficiaries on your registered accounts and specify how your other assets should be distributed. This thoughtful act underscores your commitment to their well-being.
2. Preserving your legacy
Your estate plan is more than just a distribution of assets; it’s a reflection of your life’s work and your values. When you articulate your wishes, you give your family a tangible way to remember and honour you. Whether it’s passing down a cherished family heirloom, endowing a scholarship in your name or donating to a cause close to your heart, your estate plan becomes a testament to the values that define you.
Your estate plan becomes a living tribute, ensuring that the essence of who you are is preserved and celebrated for generations to come.
Get personalized quotes from Canada’s top life insurance providers.All for free with ratehub.ca. Let’s get started.*This will open a new tab. Just close the tab to return to MoneySense.
3. Easing the burden during difficult times
Death is an inevitable part of life, and when it happens, the grief can be overwhelming. From funeral arrangements to property distribution, a will provides clear directives for your assets and plans, sparing your family from the emotional strain of navigating complex legal matters while mourning your passing. They won’t question if their (or other family members’) actions are what you want—because what you want is written out.
By writing up these details in advance, you are giving your family the precious gift of space to grieve without the added stress of managing the intricacies of an estate. As an estate administrator, I’ve seen first-hand the big difference this can make for families.
A love note for the future
While a will and estate plan may not be wrapped with ribbons and bows, their impact is immeasurable. This Valentine’s Day, I urge you to consider the significance of a will, which is a gesture that secures your families’ best interests. It’s an investment in the future, a declaration of love that speaks volumes about your commitment to the well-being and prosperity of those you hold dear. I’m not saying to replace your planned V-Day gift with a will, but definitely add it to your shopping list.
Debbie Stanley is an estate and trust professional, and CEO of the estate firm ETP Canada. She is a writer, speaker and regularly featured guest on Zoomer Radio.
New government data shows a surprisingly strong job market for the month of January.
But there are signs of weakness in the labor market, based on tens of thousands of workers who have been laid off since 2024 started.
U.S. employers announced 82,307 job cuts in January, up from 34,817 in December, a 136% increase, according to outplacement firm Challenger, Gray & Christmas.
Still, that is down 20% from the 102,943 cuts announced in January 2023 and the all-time high for that month in 2009, with 241,749 job losses.
At the same time, the latest data shows the U.S. job market is still strong, with the unemployment rate holding at 3.7%.
Moreover, the number of job openings stands at nine million, which is still elevated compared to prior to the Covid-19 pandemic, yet down from a 12 million peak, noted Mark Hamrick, senior economic analyst at Bankrate.
“On the one hand, Americans should have a sense that their job security is generally speaking in a good place,” Hamrick said. “At the same time, we have to understand that certain sectors of the economy may be experiencing more disruption or innovation.”
With that innovation comes a higher risk that workers may suffer from an income loss as the economy adjusts, he said.
For example, retail brands may be shedding positions as they continue to transition from brick-and-mortar stores to online sales. Sectors tied to the mortgage industry are repositioning in the wake of higher interest rates. Areas such as entertainment and media are adjusting to new online streaming and subscription models.
“There’s still the benefit of the elevated number of job openings,” despite the anecdotal evidence that job cuts are happening, Hamrick said.
Some companies that have open positions are eager to fill them.
“There are still companies that are hiring, and they can’t find talent fast enough,” said Vicki Salemi, career expert at Monster.
If you’re newly out of work, taking these steps may help you get hired faster.
Losing a job typically prompts a feeling of rejection, Salemi said, while getting a job offer instead prompts acceptance and optimism about the future.
To get to that latter phase faster, it helps to take a moment to acknowledge your feelings and shift into a better mindset.
Salemi recalls working as a corporate recruiter to help two candidates who had just been let go to prepare for their job search.
The first candidate who was excited about potential opportunities landed a new job in six weeks. The other who was shell-shocked from the layoff took longer than six months to find a new position.
Mindset and attitude make all the difference, according to Salemi. “Navigating this journey can be challenging, but it can definitely be overcome,” Salemi said.
Start thinking about the ideal job and what that looks like for you by asking yourself some key questions, Salemi advised.
Where is your ideal position based: in office, hybrid or remote? What industry is it in? What tasks does it require? Are there strengths or items you absolutely loved doing in your last position that you want to continue doing?
Use your time away from a full-time role to continue advancing your skills. That may include taking on a part-time role, volunteer work or online class.
When interviewing, be sure to highlight how those experiences have kept your skills fresh and enhanced what you can offer, Salemi said.
Just because you’re out of work doesn’t necessarily mean you need to take a lower salary for your next role. Even if you are coming to a new position without a job, do not discount your worth because you’re unemployed, Salemi said.
Employers are more surprised when you don’t negotiate than when you do, according to Salemi.
“Don’t be shy about negotiating that offer,” Salemi said.
Whether you’re planning to cohabitate or you’re already living together and are starting to plan financial goals, here are some tips on bringing your money together.
Talk about money with your partner early
Whether you’re married or not, it’s important to understand your partner’s financial situation, goals and values. Feelings about money formed during childhood often influence us as adults—for instance, fear of not having enough, discomfort with debt, or family taboos around talking about money. Even without these money hang-ups, everyday spending and saving can be stressful when you’re combining finances with another person.
If you and your partner are moving in together, discuss how you’ll split household costs. Will regular expenses like rent or mortgage payments, utilities, home insurance, groceries and internet be shared equally or in proportion to your respective income levels? If either of you has children, will you share daycare and other child-rearing costs?
Once you’ve covered everyday expenses and how to track them, consider how you’ll deal with the unexpected. Will you both contribute to an emergency fund? What about big-ticket surprises like a broken appliance or leaky roof? How will you handle it if one person wants the cheapest solution while the other prefers paying more for quality or prestige?
Then discuss how much to budget for discretionary items like restaurant meals, vacations, recreation and entertainment. Is everything shared, or does each partner get to spend their own “fun money” after financial obligations are covered?
Every couple is different, but for these and other money matters, clear, open and honest communication is vital to avoid conflicts and resentment down the road. Don’t wait until you face major events like buying a home or dealing with one partner’s sudden unemployment to start discussing your finances openly.
Sharing your life—and your debt
Legally, each person remains responsible for their own bank accounts, loans and credit card debt. But if you’re planning a life together, reducing your combined debt creates a stronger financial foundation. Helping your partner pay their debt will also improve their credit score, which may benefit you both in the future, when you need to finance major purchases like a home. Talk about how you’ll manage debt together. Will you help each other pay off existing obligations like credit card balances or student loans?
If you choose to keep debts separate, be aware that if your partner is behind on loan payments, the lender may seek permission to make a claim on jointly held assets—including your home.
But for young adults just starting out, soaring home prices and sky-high rents have become one of the greatest obstacles to making it on their own.
Nearly one-third, or 31%, of Generation Z adults live at home with parents because they can’t afford to buy or rent their own space, according to a recent report by Intuit Credit Karma that polled 1,249 people age 18 and older.Gen Z is generally defined as those born between 1996 and 2012, including a cohort of teens and tweens.
“The current housing market has many Americans making adjustments to their living situations, including relocating to less-expensive cities and even moving back in with their families,” said Courtney Alev, Intuit Credit Karma’s consumer financial advocate.
Overall, the number of households with two or more adult generations has been on the rise for years, according to a Pew Research Center report. Now, 25% of young adults live in a multigenerational household, up from just 9% five decades ago.
Finances are the No. 1 reason families are doubling up, Pew also found, due in part to ballooning student debt and housing costs.
Now, the average rate for a 30-year, fixed-rate mortgage is hovering near 6.6%, down from recent highs but still twice what it was three years ago.
“Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds,” said Sam Khater, Freddie Mac’s chief economist.
“While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”
Of course, housing isn’t the only issue. Millennials and Gen Z face financial challenges their parents did not as young adults. On top of carrying larger student loan balances, their wages are lower than their parents’ earnings when they were in their 20s and 30s.
“At the end of all that, you are not left with a whole lot of money to spend on a down payment,” said Laurence Kotlikoff, economics professor at Boston University and president of MaxiFi, which offers financial planning software.
Even if they don’t live at home, more than half of Gen Z adults and millennials are financially dependent on their parents, according to a separate survey by Experian.
For parents, however, supporting grown children can be a substantial drain at a time when their own financial security is in jeopardy.
Not surprisingly, parents are more likely to pay for most of the expenses when two or more generations share a home. The typical 25- to 34-year-old in a multigenerational household contributes 22% of the total household income, Pew found.
From buying groceries to paying for cellphone plans or covering health and auto insurance, parents are spending more than $1,400 a month, on average, helping their adult children make ends meet, another report by Savings.com found.
“It has to go both ways,” Kotlikoff said.
Overall, there can be an economic benefit to these living arrangements, Pew found, and Americans living in multigenerational households are less likely to be financially vulnerable. “If you are in financial union, make the best of it,” Kotlikoff said.
Ideally, your grandchild or grandchildren will have an RESP. Perhaps your own kids have already opened one for them. If not, you can open an RESP—in fact, anyone can become a “subscriber,” including parents, guardians, grandparents, other relatives, and friends. A child can be the “beneficiary” of multiple RESPs, but here’s the key detail to note: the lifetime RESP contribution limit per child is $50,000. Any excess contributions will be taxed, so it’s important for contributors to coordinate their efforts.
An overview of RESPs
If you’re new to RESPs, here are some common questions (and the answers) about these plans:
What is an RESP? RESPs are registered savings and/or investment accounts, meaning they’re registered with the Canadian government and they offer tax advantages.
What can RESPs be used for? Your grandchild(ren) will be able to use their RESP to pay for tuition plus a wide range of other educational expenses: accommodations, textbooks, school supplies, transportation, and more.
Where can I open an RESP? At a bank or an investment firm, including providers that specialize in RESPs, like Embark. You will need your grandchild’s social insurance number (SIN)—another good reason to coordinate with their parents.
Are RESPs taxed? Money and investments held inside an RESP grow tax-sheltered. The grants and growth—including interest, dividends and capital gains—aren’t taxed until withdrawn, and then they’re taxed at the beneficiary’s (child’s) marginal tax rate. (This will likely be very low since they’re in school.)
Do I get a tax deduction for contributing to an RESP? No. But you also don’t pay tax when you withdraw the money you contributed.
Why else should I open an RESP? The biggest incentive for opening an RESP is free government grants. Through the Canada Education Savings Grant (CESG), the Canadian government will match 20% of your contributions, up to $500, in a given year, up to a lifetime limit of $7,200. In addition to the CESG, families below a certain income threshold may also qualify for additional government grants, called the Additional Canada Education Saving Grant (ACES) and the Canada Learning Bond (CLB). The CLB grant does not require plan subscribers to make any contributions. Families living in certain provinces (Quebec and British Columbia) can also apply for other grants. Read more about government RESP grants.
What if I have multiple grandchildren? You or the children’s parents can open a family RESP. Keep in mind that all children within the RESP must be related by blood or adoption (siblings). This means that as a grandparent, if you have multiple grandchildren (who are not all siblings), each group will need their own RESP. The grants and growth in a family RESP can be shared among beneficiaries—very helpful if one child’s education costs more than another’s.
How long can an RESP stay open? A very long time: 35 years. But it’s important to pay attention to the annual RESP deadline of Dec. 31, if you want to maximize government grants.
What’s the best way to get the maximum RESP grant?
To get the maximum CESG amount of $7,200, it’s a good idea to plan for RESP contributions. This is helpful both for organizing your own finances and for coordinating between contributors, including your grandchildren’s parents. You could even automate your contributions, to make it easier to stick to a consistent schedule.
First, let’s look at how to get the maximum of $500 in CESG in a given year. The government matches 20% on the first $2,500 annually, so a child’s RESP contributors would need to put in $2,500 to get $500 in CESG each year. Collectively, you can contribute more than $2,500 in any year—there’s no limit to annual RESP contributions (not exceeding the $50,000 lifetime limit)—but the maximum CESG per year is $500.
To get the maximum lifetime CESG amount of $7,200 for the child, the RESP contributors will need to put in $2,500 per year for 14 years, and then another $1,000 when the child is age 15. If you don’t contribute $2,500 in a certain year, you can catch up the following year, but note that the maximum CESG in one year is $1,000—meaning you can only catch up one year at a time.
Call in the experts
If you need guidance on planning RESP contributions, maximizing government grants and adjusting RESP investments over time, talk to the Education Savings Specialist at Embark. Right now, Embark has a special offer for MoneySense readers: Start an account using the promo code MONEYSENSE100 and it will contribute $100 to your grandchild’s education when you save $200. Visit Embark* for details.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.
What does the * mean?
If a link has an asterisk (*) at the end of it, that means it’s an affiliate link and can sometimes result in a payment to MoneySense (owned by Ratehub Inc.) which helps our website stay free to our users. It’s important to note that our editorial content will never be impacted by these links. We are committed to looking at all available products in the market, and where a product ranks in our article or whether or not it’s included in the first place is never driven by compensation. For more details read our MoneySense Monetization policy.
Andrew Lo is the CEO of Embark, Canada’s education savings and planning company. As a fintech leader for over 30 years, he’s focused on making the best financial services available to Canadians.
Once you’ve opened an RESP for your (grand)child or (grand)children, though, what should you do with it?
How often and how much to contribute to an RESP
Ideally, you should contribute at least $2,500 per year, if possible. An RESP can stay open for up to 35 years, giving you plenty of time to contribute up to the $50,000 maximum. An important date to be aware of when it comes to your contributions is December 31st of each year. The end of December marks the government grants deadline, specifically for the Canada Education Savings Grant (CESG). This grant matches 20% of your first $2,500 in contributions per year, up to $500, to a lifetime maximum of $7,200 per child. (To get the full $7,200, you need to contribute $36,000 strategically.)
The CESG is available until the end of the calendar year that your child turns 17. But take note: you can only catch up on the CESG one year at a time, for a maximum grant of $1,000 in a given year. That’s why it’s best to contribute early, often and to stick to a schedule.
You can deposit and save cash inside an RESP, but its value is unlikely to keep pace with inflation over time. Many families invest in the account so that the money has the potential to grow. An RESP can hold:
These types of assets have varying levels of risk and potential reward. Bonds and GICs have guaranteed rates of return, while mutual funds, ETFs, stocks and options depend on the performance of financial markets. It’s important to choose investments that fit your family’s needs and situation, including your time horizon (how long until your child heads off to college, university or trade school) and risk tolerance (your comfort level with investment volatility). Your child’s RESP shouldn’t be keeping you up at night.
An RESP expert can help you choose investments
Maybe you’re very good at saving but you’re new to investing. You can call upon RESP experts, such as those at Embark, for assistance. Embark’s Student Plan uses a glide path investment strategy that automatically adjusts to build savings when your child is young, before investing more conservatively closer to your withdrawal period so you’ll have as much funding as possible when you need it. Currently, Embark has a special offer, exclusive to MoneySense readers: Start an account using the promo code MONEYSENSE100 and Embark will contribute $100 to your child’s education when you save $200. Visit Embark* for details.
Read more about RESPs:
This article is sponsored.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers.
What does the * mean?
If a link has an asterisk (*) at the end of it, that means it’s an affiliate link and can sometimes result in a payment to MoneySense (owned by Ratehub Inc.) which helps our website stay free to our users. It’s important to note that our editorial content will never be impacted by these links. We are committed to looking at all available products in the market, and where a product ranks in our article or whether or not it’s included in the first place is never driven by compensation. For more details read our MoneySense Monetization policy.
Andrew Lo is the CEO of Embark, Canada’s education savings and planning company. As a fintech leader for over 30 years, he’s focused on making the best financial services available to Canadians.
