Tag: student money

“Not free money”: What students should know before getting their first credit card – MoneySense

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Tips on building a credit score

Paying your full balance each month shows you’re using credit correctly—you’re budgeting—your spending doesn’t exceed your earnings. Young consumers are still getting into trouble during this life phase, said Thuy Lam, a certified financial planner at Objective Financial Partners.

“I see so many students—even when I was a student, my own friends—get into $20,000, $30,000, and $40,000 of credit card debt during school years because they don’t realize that, ‘Oh, it’s not free money,’” she said.

Get a low limit and resist any offers to increase it until you’ve established good spending habits, Lam added. For students with minimal cash flow—not working part-time during school, little savings—this credit card barely needs to be used at all.

You can drop one recurring bill on your card, like a phone plan. A small amount is easy to pay completely and having it show up every month establishes a good history of timely payments.

“I think the key is keeping in mind: what is the purpose of a credit card?” Lam said. “And for students, that’s No. 1: facilitating small bill payments and, No. 2: building and establishing credit.

“The purpose of a credit card is not so we can spend freely, it’s because we live in a credit system,” she added. “It’s just important to establish credit and keep it healthy.”

Are rewards credit cards good for students?

As for rewards, Taub pointed out that some students may have support from their parents, savings, RESPs, or scholarships—and with those resources, they might find value in travel, concerts or other lifestyle perks.

But she also noted most students are struggling financially; a recent TD survey found 65% of students said they were financially unstable. There may be more value in a simple cash-back card.

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The Canadian Press

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October 2, 2024
Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

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“They may see a slight increase in their income, and they think, ‘Oh, I just kind of hit the lottery, and now I’m going to spend like crazy,’” Schwartz said. “And it’s tough to change those behaviours after it’s been ingrained for a long period of time.”

To prevent this from happening, track spending diligently—you can download apps for this purpose—and delay milestones such as moving out or getting a car if you can, Schwartz said. Build up an emergency fund in case you lose your income or suffer a financial setback, to avoid falling into serious debt.

“If you have the opportunity when you’re young, when you’re not spending as much on rent, you’re not spending as much on food, if you can cut back on how much you’re socializing—that’s a great place to start to build up that reserve fund,” Schwartz said.

Live within your monthly cash flow—using your debit card or cash—and develop a short-term austerity plan to make big strides on debt repayment, Terrio said.

When to focus on debt repayment

Summer months are tough for austerity because you want to socialize, he pointed out, but January through March are a good time to adhere to a severe budget. Up to 40% of your non-rent income should go to debt, Terrio said, noting short-term austerity is tolerable because it’s over quickly.

Ultimately, the aim is to reach the tipping point when at least half of your debt payment is going to the principal—and the portion going to interest starts to slide. Never use an instalment loan, he added.

“All these 36 to 48% interest loans that are $10,000—if you get one of those, you’re done,” Terrio said. “You’re never, ever getting out.”

Once you’re free of debt, stay that way. Keep your credit limit low and turn down offers to increase it, Terrio said. If you move debt to a line of credit, stop using your credit card.

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The Canadian Press

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May 28, 2024
Is an RESP worth it? Yes, even if only for the government grants – MoneySense
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Why open an RESP? Grants and tax-deferred growth
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.

About Jaclyn Law

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.
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Jaclyn Law

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February 12, 2024
Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense” – MoneySense

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Jordan Heath-Rawlings shares your frustration. In November 2023, he launched In This Economy?!, a podcast that helps Canadians tackle financial challenges. Described as “Your guide to understanding an unpredictable economy,” the show explores topics such as inflation, employment, debt, home ownership and repaying CERB.

Heath-Rawlings, who lives in Toronto, is a long-time Canadian journalist—he was a newspaper reporter, a founding editor of Sportsnet, and director of special projects at Rogers Media, among other roles. In 2018, he started Frequency Podcast Network, along with Canada’s first daily news podcast, The Big Story, which he still hosts (he also oversees 30-plus other shows). Below, Heath-Rawlings shares what he thinks about credit, debt, real estate and more—plus why he’s now a “huge points guy.”

Check out In This Economy?!, available on these podcast players. New episodes are released on Thursdays.

Who are your finance heroes?

So, In This Economy?! is designed to come from a curious person, not someone who has studied the financial industry extensively and has formed opinions about it. I don’t really have a finance hero. Except, I’ll say this: My career as a sports journalist, including a lot of time writing about fantasy sports and gambling, has made me keenly aware of the concept of the “mass market miss”—a player or investment that doesn’t seem to match stereotypical norms, so it’s overlooked compared to others, creating easy value for those willing to value results over aesthetics. So, can I say, like, baseball writer Bill James or baseball executive Billy Beane?

How do you like to spend your free time?

I’m a homebody for the most part, so hanging around the house, watching sports, being with family. My partner is a travel junkie, though, so we try to find the time—and money—to take a few trips a year.

If money were no object, what would you be doing right now?

Golfing—somewhere warm. With my wife and daughter on the beach waiting for me to meet them afterwards. We’ll be doing this in a few weeks from now, and I’m already dreaming about it.

What was your first memory about money?

My first money memory—besides making like 25 cents per row weeding the garden for my grandfather—is my parents wisely not spending $200 to buy me Air Jordans that I would have wrecked in two weeks anyway. I grew up in the burgeoning sneaker era, when they were just becoming big-time status symbols, and I wanted what the cool kids had.

What’s the first thing you remember buying with your own money?

Oh, baseball cards. It is absolutely 100% baseball cards. And I still have them in a box in our basement. Sadly, I came of age during the absolute peak popularity for kids collecting cards, so they aren’t worth anything, save for the memories. But in 1988, I—and every other kid I knew—would have told you they’d have made me rich by now.

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MoneySense Editors

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January 16, 2024

ETFs and RESPs: It’s always a good time to invest in education – MoneySense

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With that in mind, here’s a key date to circle on your calendar: Dec. 31. That’s the deadline for making RESP contributions to maximize government RESP grants each year. The Canada Education Savings Grant (CESG) matches 20% of what you put in, up to a limit of $500 annually. To receive the full $500, your contributions must total at least $2,500 by the end of December. The lifetime CESG maximum per beneficiary (child) is $7,200, and you can only catch up one year at a time—so, you can see why that annual deadline merits attention. That’s especially true if you only have a few years to save before your child heads off to school.

Now is a great time to plan your contributions for this year. Here are some things to consider.

Despite its name, an RESP is much more than just a cash savings account. In fact, just holding cash in an RESP may not always be the best strategy, as inflation can erode its value over time. It’s worth looking into different ways to grow that money.

There’s no one-size-fits-all answer for the best RESP investment options. The right mix for your family will depend on several factors, including your financial circumstances, how much time you have, and how comfortable you are with risk. To help you make the most of your RESP, the Canada Revenue Agency (CRA) provides a list of “qualified investments” for this account, including the following:

Bonds: These can be either government-issued or corporate-issued. Bonds are generally seen as a safer investment compared to stocks, offering fixed interest payments over time.
Guaranteed investment certificates: GICs are issued by financial institutions, and you can choose terms such as one, two, three or five years. At the end of the term, you’ll receive a guaranteed amount of interest. Generally, you must wait until then to access your money.
Stocks: Investing in individual stocks can offer high returns, but they generally come with higher volatility than bonds and GICs. It’s essential to thoroughly research the companies you’re thinking about investing in—and remember, picking stocks can be risky!
Mutual funds: These funds can hold a mix of stocks, bonds and other assets. They offer diversification and are managed by financial professionals. Investors pay a percentage of the value of their investment towards annual management fees.
Exchange-traded funds: ETFs are similar to mutual funds in that they can hold a mix of assets like stocks and bonds. However, ETF shares trade on stock exchanges, just like individual stocks. Most ETFs are passively managed, but more active ETFs are coming onto the market.

ETFs are a fast-growing asset class in Canada. They offer investors numerous benefits, including:

Built-in diversification: ETFs may bundle various assets, providing wide exposure across different sectors, asset classes and geographies, which helps in reducing investment risk.
Professional management: With ETFs, a fund manager oversees the selection and rebalancing of holdings, often trying to replicate specific stock market indices (such as the S&P 500), thus reducing the complexity of managing individual stocks and bonds.
Ease of transactions: ETFs are traded on stock exchanges and are accessible through financial advisors and online brokers.
Flexible asset allocation: ETFs offer a spectrum of asset allocation options, so they may be suitable for investors with different risk tolerances and investment timelines.

Choosing the best ETF for your RESP largely depends on two variables: your time horizon (how long until your child needs the funds) and your risk tolerance (how much market fluctuation and potential losses you can comfortably handle).

To simplify this decision-making process, one option to consider is an all-in-one ETF, such as those offered by Fidelity. These ETFs offer different asset allocations and risk classifications. Fidelity’s All-in-One ETFs have the following target asset allocations and risk classifications (as at Oct. 31, 2023):

Fidelity All-in-One ETFs	Conservative	Balanced	Growth	Equity
Risk classification	Low to medium	Low to medium	Medium	Medium
Ticker	FCNS	FBAL	FGRO	FEQT
Equity	40%	59%	82%	97%
Fixed income	59%	39%	15%	0%
Crypto	1%	2%	3%	3%

Source: Fidelity Investments Canada ULC

Fidelity’s suite of All-in-One ETFs offers strategic diversification, with most of them giving you exposure to global bonds and stocks from all market sectors. Interestingly, they even include a small exposure to cryptocurrency (1% to 3% depending on the fund), adding a modern twist to traditional investment portfolios. (Read more about crypto in Fidelity ETFs.)

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Tony Dong

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January 9, 2024

Is studying in Quebec still worth it for out-of-province university students? – MoneySense

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But starting next fall, prospective students from outside the province may face a steep increase in tuition fees at schools like McGill University, Concordia University and Bishop’s University, thanks to new rule imposed by the Quebec provincial government, designed to promote and protect the French language. If implemented, the change could prompt many out-of-province students to reconsider their education plans. Here’s what’s being proposed and what it means for students.

Current tuition fees for out-of-province and international students studying in Quebec

Out-of-province students who study in Quebec already pay a lot more in tuition fees than Quebec residents. The table below shows the tuition fees for undergraduate students enrolled in a business program for the 2023-24 academic year. (Note that fees may vary by program of study, and the numbers listed exclude administrative, compulsory and other fees.)

University	Language of instruction	Quebec students	Out-of-province students	International students
McGill University	English	$2,881	$8,992	$65,604
Concordia University	English	$2,881	$8,992	$33,300
Bishop’s University	English	$2,881	$8,992	$27,006
UQAM	French	$3,640	$9,750	$24,600
Université Laval	French	$2,881	$8,992	$23,668
Université de Sherbrooke	French	$2,881	$8,992	$28,830

As you can see, many out-of-province students currently pay more than three times more than Quebec residents. International students pay the highest fees of all. In general, French-language universities seem to charge international students less than English-language universities.

Proposed Quebec tuition fee changes

In October 2023, the Quebec government outlined plans to raise tuition fees for out-of-province undergraduate students from $8,992 to $17,000 per year. The province is now reportedly reconsidering its initial plan, and it may instead only raise tuition for out-of-province students to $12,000 per year. Either way, students who are currently in the system would be exempt from the tuition hikes (except those who change programs), as would PhD students.

While the new rules would apply to all universities, the province’s three English-language universities—Bishop’s University, Concordia University and McGill University—have been in the news because they would be most directly impacted. Most of Quebec’s out-of-province students study in English.

International students may also be affected, though less than out-of-province students. Keeping with the province’s original plan, international students would pay a minimum of $20,000 per year in tuition. Universities would continue to have the right to impose additional discretionary fees.

There’s no doubt that these changes would impact incoming out-of-province and international students. On top of needing to come up with more money for tuition, the changes could influence the quality of education, particularly at Quebec’s English-language universities. McGill University, for example, says it could lose 60% of its out-of-province students. It projects that this would contribute to a drop of around $42 million in annual revenue, which would have a domino effect on staffing and resources available for students.

So, is studying in Quebec still worthwhile?

Canadian students outside of Quebec who want to study in the province could see tuition costs jump by $3,000 to $8,000 more per year starting in 2024. That would be a financial shock for anyone, let alone students, who often don’t have a consistent or reliable source of income. So, how can you decide if studying in Quebec is still worth it? Start by answering the following questions.

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Sandy Yong

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December 4, 2023

Top 5 questions about family RESPs – MoneySense
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What is a family RESP?

Canadians can choose from two types of RESPs: individual and family. Both are registered accounts, meaning that they’re registered with the federal government, and they allow your savings and investments to grow on a tax-sheltered basis.

Here are the key features you should know about for both types of RESPs:

The lifetime RESP contribution limit per beneficiary (child) is $50,000.

A beneficiary can have more than one RESP (for example, if a parent opens one and a grandparent opens one), however, the maximum contribution is still $50,000.

The Canada Education Savings Grant (CESG) matches 20% of the first $2,500 in RESP contributions per year. That’s $500 in free money per year!

If your family’s adjusted income is below a certain amount (for 2023, it was $106,717), you can also receive the “Additional CESG,” which adds up to $100 more, after you contribute your first $500 per year.

The CESG’s lifetime maximum, including Additional CESG, is $7,200 per child.

Low-income families also receive the Canada Learning Bond (CLB), with no personal contribution required, to a lifetime maximum of $2,000 per child.

Families in British Columbia and Quebec have access to additional grants: $1,200 in British Columbia and up to $3,600 in Quebec. (Read more about these provincial RESP grants.)

You won’t get a tax deduction for contributing to an RESP like you would with a registered retirement savings plan (RRSP), but your contributions won’t be taxed when withdrawn.

Government grants and growth inside an RESP are taxed when withdrawn, but they’ll be taxed at the child’s marginal tax rate—which will likely be very low.

You can turn an individual RESP into a family RESP anytime, as well as add and remove beneficiaries from the plan.

Now that we’ve covered RESP basics, let’s tackle five of the most common questions about family RESPs we get at Embark.

1. How are funds in a family RESP divided among beneficiaries?

Here’s where the flexibility of a family RESP comes into play. Outside of the CLB, government grants and the growth on the investments can be shared among the plan’s beneficiaries—and the amounts don’t have to be equal. So, if one child’s education costs more than another’s, you can divide the funds accordingly. You can also start using RESP funds for one child’s post-secondary education while another is still in grade school and collecting grant money. It’s nice to have that flexibility.

2. What if one or more beneficiaries do not use their RESP funds?

In a family RESP, one child’s unused funds can be allocated to another child’s education. If none of the beneficiaries attend school, you could keep the plan open in case they change their mind.

You could also transfer any unused income in the RESP to your or your partner’s RRSP as an Accumulated Income Payment (AIP). The transfer limit is $50,000, and you would have to return any government grants. Three other requirements to be aware of: You must have enough RRSP contribution room to make the transfer; the RESP must have been open for a minimum of 10 years; and the beneficiaries must be age 21 or older and not pursuing further education.

If you don’t intend to add any more beneficiaries to the plan, and you don’t need the RESP any longer, you could close it. If eligible, your original contributions will be withdrawn tax-free, but you will pay taxes on any investment gains—unless they’re transferred to your RRSP as an AIP.

3. Can you add another generation of beneficiaries to an existing family RESP?

The short answer is no. Within a family RESP, all beneficiaries must be related by blood or adoption, meaning only siblings can be added to a family RESP. This would prohibit a grandparent from adding their grandchildren to a family RESP that was previously opened for their children. Additionally, since an RESP can only be open for 35 years, adding a younger sibling to a plan initially opened for someone close to or at withdrawal age would significantly cut down the time the younger beneficiary has to accumulate savings before the RESP would be closed.
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Andrew Lo

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December 1, 2023
Contributing to your grandchild’s RESPs: What grandparents need to know – MoneySense

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The best way to save for school: Open an RESP

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.

What can an RESP hold? A wide range of assets, including cash, bonds, guaranteed investment certificates (GICs), stocks, mutual funds and exchange-traded funds (ETFs).

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.

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 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.

About Andrew Lo

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.

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Andrew Lo

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December 1, 2023
Are RESP contributions tax-deductible? – MoneySense

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First, a quick refresher on these registered accounts: RESPs provide a tax-advantaged way to invest in your children’s or grandchildren’s future education. Contributions to an RESP account and investments held in an RESP are tax-sheltered as long as they remain inside it. And that’s not the only benefit of opening an RESP. The Canadian government also contributes by matching grants to your child’s RESP through the Canada Education Savings Grant (CESG). (More on government grants below.)

Maximizing RESP contributions and understanding withdrawal rules can save you a lot in taxes while you save for your child’s or grandchild’s post-secondary education. Let’s look at common questions in more detail.

Is an RESP tax-deductible?

Unlike with a registered retirement savings plan (RRSP), RESP contributions themselves do not give you a tax deduction. However, this doesn’t make the RESP account less powerful as an education savings vehicle. The RESP has three significant benefits for investors:

Tax-sheltered growth: Money invested in an RESP is tax-sheltered, meaning it continues to grow tax-free as long as it stays within the RESP account.

Withdrawals are taxed in the hands of the beneficiary: Unlike RRSPs, money withdrawn from an RESP and used towards educational expenses is taxed in the hands of the plan’s “beneficiary” (the student), not its “subscriber” (parent or grandparent who opened the account). This is good news, because students are usually in a lower tax bracket than their parents or grandparents and will likely pay little to no income tax.

Government grants: The RESP is made more attractive by the Canada Education Savings Grant (CESG), a 20% boost to your RESP made by the federal government, up to a yearly maximum of $500 and a lifetime maximum of $7,200. If you contribute $2,500 to the RESP in a given year, the government will contribute 20% of that: $500. Some families are eligible for other government grants, too.

Is money earned in an RESP taxable?

Money earned within an RESP could come from interest, dividends or capital gains, along with government contributions mainly through the CESG. As long as these earnings remain within the RESP account, they are not subject to tax, allowing the power of compounding to work its magic. This tax-sheltering of RESP earnings ensures that your investment and government grants can grow unimpeded by taxes, until they’re needed for the beneficiary’s post-secondary education. But, unlike a tax-free savings account (TFSA), RESP withdrawals are not tax-free when withdrawn. The money withdrawn for the beneficiary’s education—whether investment gains or grant money—is categorized as Educational Assistance Payments (EAP) and taxed in the hands of the beneficiary (the student).

How do I report an RESP on tax returns?

Reporting your RESP on tax returns is pretty straightforward. Because RESP gains are tax-sheltered, you don’t need to make any tax declarations until the RESP money is withdrawn as EAPs. Once the money is withdrawn to pay for the beneficiary’s educational expenses, the RESP provider will give the beneficiary a T4 slip specifying the total amount of money received as EAPs in the tax year—including investment income and government grants. The amount from this T4 slip must be entered as “income” on the beneficiary’s tax return.

Are RESP over-contributions taxed?

Although RESPs don’t have a yearly contribution limit, they do come with a lifetime contribution limit of $50,000. And yes, RESP over-contributions are definitely taxable. If contributions exceed the lifetime contribution limit of $50,000, the excess contribution is taxed at 1% per month until it’s withdrawn. This tax on overcontributions must be paid within 90 days after the end of the year in which the overcontribution happened. Overcontributions can be withdrawn and do not need to remain in the RESP.

RESPs serve as a tax-advantaged account for post-secondary educational savings and investments. It beneficially weaves together tax-sheltered investment growth, government grants and favourable withdrawal taxation rules. If you understand RESP contribution and withdrawal rules, the RESP account can be invaluable to your family’s financial toolkit.

If you need more guidance on RESPs and taxes, help is available. The RESP experts at Embark can show you how to maximize your savings and minimize taxes. 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.

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Aditya Nain

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December 1, 2023
Health insurance in Canada: A primer for students and recent grads – MoneySense

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If you’re in school, you most likely have supplemental health and dental insurance. Some educational institutions make this mandatory by including the cost in your tuition fees. However, if you’re a new grad, you may be getting accustomed to managing health insurance on your own (as opposed to through your parents or school). Here’s a quick lesson on what health insurance is, how it works, where you can buy it and the benefits you can receive.

What is health insurance?

A health insurance plan helps to cover the costs of your medical and dental bills. Depending on the provider and type of plan you choose, health insurance can cover a number of health-related expenses. Coverage typically includes prescription drugs, vision care, dental care, medical equipment and visits to medical practitioners (such as physiotherapists, dietitians and registered massage therapists).

How does health insurance work for students?

Depending on your school, you may be automatically enrolled in the health insurance plan that’s offered to students. Once you’re enrolled, you can download a copy of the plan details. You’ll also receive a benefits card that will have your plan identification on it. You will need to present this card to your healthcare provider at every visit when paying for your services (in my experience, most providers will keep this information in your file).

Health insurance for students in university: How it works

How can students access their benefits?

Some health and dental service providers set up direct billing. This means they bill the insurance company directly, and you will only be required to pay the balance not covered by your plan. If they don’t have direct billing, then you’ll need to pay the full amount out of pocket, and then submit an online claim with your receipt to receive reimbursement. It can take several business days to assess your claim and for the amount to be deposited into your bank account.

Health insurance for international students in Canada

If you’re an international or foreign-exchange student, you’ll need to research the health insurance for the particular province or territory in which you are studying. Some provinces provide health coverage to international students that is either free or for an added cost, and you’ll be required to apply through the province.

For example, international students studying at a university in Ontario must obtain mandatory health care coverage through the University Health Insurance Plan (UHIP), a not-for-profit insurance plan created by Ontario’s universities that is comparable to the Ontario Health Insurance Plan (OHIP).

In other cases where provincial health insurance is not offered, students need to purchase personal health insurance, typically through their school in Canada. Be sure to check if these health plans are mandatory or optional.

What happens to students when they leave school and no longer have coverage?

If you’re no longer in school and find yourself without any health insurance coverage, you’re not alone. Acquiring your own health insurance plan could be the solution—if you’re concerned about paying for hefty medical bills that may arise due to an injury or illness while finding employment. This can help bridge the gap while you’re looking to get a job offer from an employer that provides health insurance.

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Sandy Yong

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October 25, 2023

Tag: student money

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