Monthly Archives: September 2019

A Knowledge First Financial Guide on How to Use RESP Money

At the start of a new academic year, students may feel financial prepared for the year ahead. Your bank account is still looking good, even after paying for the basics like tuition and books, but in the coming months, as your savings start to dip, you may start to worry if you have enough to cover day-to-day or any unexpected expenses that come with university life.

The good news?

If someone put aside money in a Registered Education Savings Plan (RESP) for you, funds can be withdrawn to cover expenses while you are in school. All you need to do is get a proof of enrolment and contact your RESP company for more information on how to withdraw money.

The bad news?

A little knowledge about how RESPs work can help you make efficient use of the money. In this article, we’ll give you an overview of the right way to withdraw RESP money so you minimize the tax you pay as a student. We’ll also talk about how to withdraw money if you are NOT in school. As always, it’s always best to talk to an RESP expert for the best advice so you can go about withdrawing your funds in a way that works best for your situation.

Withdrawing Money from an RESP: Rules for Different Categories of Funds

RESP money falls into one of three categories: contributions (money your parents saved); government education grants which are added to RESP savings through programs like the Canada Education Savings Program; and interest earned on the money while it stays in the plan. The last two categories are the most important for students to know about. You’ll see why as you read on.

Withdrawing RESP Contribution Amounts

Contributions are funds that are put into an RESP and can be withdrawn tax-free at any time tax-free, as long as you (as a beneficiary of an RESP) are in a post-secondary program. In Canada, this means:

– A program that is at least 3 consecutive weeks’ duration

– 10 hours of instruction per week

– Full- or part-time

Post-secondary studies includes very broad range of educational options after high school – college, university, trade schools, apprenticeships – the list is very extensive. You can also use RESP money to fund international full- or part-time post-secondary programs, although there may be slightly different criteria.

Contribution money withdrawn from an RESP while you are in school are called ‘Post-Secondary Withdrawals’ and most RESPs allow you to choose how much and how often to take funds out. PSE Withdrawals can be made to the person who opened the plan, or to the student, but in either case, no tax is paid. This is good for students to keep in mind who want to minimize their tax payments or unexpectedly need extra funds while in school.

Why RESPs Are Unique

To encourage education savings, the government of Canada offers incentives that can only be accessed through an RESP. These incentives come in the form of government grants and tax-deferred growth on all the money in the RESP.

Grants and income are withdrawn as Educational Assistance Payments (EAPs). EAPs are taxable to the student, which usually means there is minimal tax to pay. We will explain the best way to withdraw EAPs but first, let’s cover the grants.

Government Grants

First, here are the grants:

– The Canada Education Savings Grant (CESG)

– The Canada Learning Bond (CLB)

– Provincial government grants, which exist in British Columbia and Quebec

Canada Education Savings Grant (CESG): The CESG pays 20% on the first $2,500 deposited into an RESP up to a maximum of $500 per year and $7,200 lifetime per child. Depending on net family income with Additional CESG a child may receive the $7,200 sooner.

Canada Learning Bond (CLB): The CLB makes it easier for lower income families to save by depositing an initial contribution of $500 in a child’s RESP and $100 per hear from age 1 to 15, to a maximum of $2,000. No RESP contributions are required to receive the CLB. Eligibility is based in part on family income and number of children.

Provincial Grants (British Columbia and Quebec)

Currently the only two provinces that offer education savings grants are British Columbia and Quebec. Saskatchewan had one (SAGES) but it’s been suspended; Alberta also had the Alberta Centennial Education Savings plan, which was closed in 2015.

In the case of Quebec’s RESP grant (QESI), the amount of money you receive depends on your contributions.

In BC, on the other hand, the British Columbia Training and Education Savings Grant (BCTESG) is a one-time grant worth $1,200. No contributions are required but BCTESG is only paid into an RESP when a child is between 6 and 9 years of age.

Investment Gains (Interest)

While money is in the RESP, they will earn interest or returns. The amount will depend on the type of RESP investment vehicle chosen and there is a wide range of choice available to meet different investment styles.

Educational Assistance Payments (EAP) – Withdrawing Grants & Interest While in School

You can only receive an EAP if you are enrolled in a post-secondary program. This money includes the grants received and all interest earned within an RESP. A flexible RESP gives you the most choice in the amount and timing of withdrawing EAPs – RESP companies may have slightly different rules or forms – but the most important tip on withdrawing grants and income is this:

EAPs amounts are added to a student’s taxable income the year they are paid. If you aren’t working during school, you’ll likely have little or no tax to pay.

Not in School But Want to Withdraw RESP Money?

Life happens. Whether things may not go according to plan or you feel your path may lead you in a completely different direction. Before a decision is made to close an RESP – you can keep it open for up to 35 years from the start date, so if might be some form of schooling in the future – you can leave the money there to help you take that step when you’re ready.

But what happens if you want to use your RESP money today?

Contributions can be withdrawn tax-free from an RESP as a non-PSE withdrawal but let’s take a look at what happens to each government grant when it comes to contribution withdrawals for non-post-secondary use.

The Canada Education Savings Grant (CESG)

Because CESG amounts are based on how much you put into an RESP, you have to return this money proportional to how much of your contributions you withdraw.

It goes like this.

The government will give you 20% in CESG for the first $2,500 in RESP contributions, every year, per beneficiary, and up to a lifetime total of $7,200 per beneficiary.

So if you withdraw $2,500 in contributions that you received the 20% CESG grant for, you will need to return $500 to the government.

For example: If $5,000 in contributions are withdrawn as a Non-Post-secondary Withdrawal, the RESP provider must return the CESG amount received (20% or $1,000) to the government.

If all contributions are withdrawn and the RESP is closed, all CESG money remaining in the RESP must be returned to the government.

Keep in mind that you won’t have received these CESG amounts if you didn’t apply for them. Obviously, if you didn’t receive the grant, you won’t have to return it.

CLB and Provincial Grants

Like the CESG, the Canada Learning Bond and provincial education savings grants may be returned to the government when RESP money is withdrawn for non-educational purposes. It’s always best to talk with an RESP expert to discuss your specific situation.

Withdrawing Investment Gains (Interest)

Say $5,000 was contributed to an RESP and the provider invested the money wisely, netting a $200 gain.

In this case, the $200 interest can be withdrawn for non-educational purposes once:

– The RESP has been open for at least 10 years and all beneficiaries are 21 years of age or above and are not currently pursuing education after high school; or

– All previous and current beneficiaries on the account have unfortunately passed away; or

– The plan has been open for 35 years (RESPs can only stay open for 36 years, per the government)

If the above criteria are met and interest in an RESP withdrawn for non-educational purposes, you will be taxed on them at whatever your tax rate for the year is — plus an additional 20% penalty. Interest can also be rolled into an RESP, if there is room.

In other words, the government really doesn’t want you cashing out these profits for non-educational purposes. Understandably, however, life circumstances may leave you with no choice — and thankfully, the option does exist.

How to Request an RESP Withdrawal

Ok, so now you know the rules regarding withdrawing different types of money from an RESP.

How do you, practically speaking, go about requesting a withdrawal of contributions for emergency, non-educational purposes.

The process is actually quite straightforward.

In the case of Knowledge First Financial’s Flex First and Family Single Student plans, simply fill out their RESP withdrawal form and select Option 2, which allows the withdraw contributions for emergency, non-educational purposes.

Other RESP providers will have similar forms to trigger a withdrawal.

Keep in mind that only the RESP’s “subscriber” (typically a parent) can do this. The student (or the “beneficiary” of the RESP) cannot trigger a withdrawal; unlike conventional, penalty-free withdrawals for educational purposes, what you do with your contributions in an emergency withdrawal situation is up to you.

Conclusion

As you can see, there are rules surrounding how you withdraw money from an RESP for non-educational, emergency purposes.

Thankfully, these rules do allow tax-free withdrawals of contributions to an RESP. Things get stricter and taxes are applied when interest earned is withdrawn.

Further, government grant amounts cannot be withdrawn for non-educational purposes — and contribution withdrawals for non-educational purposes may trigger a grant repayment, depending on how much is withdraws in contributions.

In many cases, requesting a withdrawal is as simple as filling out a form with your RESP provider. Be sure to discuss your financial situation with them for personalized advice.

Taking Risks With Your Marketing Plan

Successful marketing is about taking risks. Whether you are launching a startup or expanding your business, every marketing opportunity presents the risk of failure. Rather than leveraging every idea, develop a principle of making smart moves in terms of approaching risk.

Evaluate the Risk

The first test should be to assess the risk. Get your compass by determining the results of a possible risk. What amount of money should you risk to test your marketing strategy? Understand, you are not experimenting for the sake of it. Ensure that your risk is well calculated. For instance, if you are running an email campaign, track the un-opens and unsubscribes. These metrics should tell you whether your tactic is working or not.

Invest in your Bottom Line with Innovation

You do not want your company to stay stuck in the status quo. Be careful to balance competing priorities including your drive for innovation and revenue model. Begin by finding out how your business niche is evolving and grab opportunities that might work for you.

If you do not leverage these opportunities, your competitors will fly with them and get a better competitive advantage over you. You need to break out of old marketing ideas if you are to reach your target market strategically.

Just because the industry standard is giving you some good results does not mean you cannot try out other strategies to push you further into the market. This could mean experimenting with new marketing channels such as TV, radio, and newspaper, among others.

Evaluate Every Opportunity

Do not grab every opportunity that presents itself. Start by examining each critically and gather as much valuable information about it as you can. Determine the course of action and weigh options to ensure you are not being led by fear or your emotional drive.

Remember to focus on your value proposition and find out if the new marketing opportunities address your core agenda of capturing an audience. Does the opportunity present you as valuable to your target market in your competitive space?

Addressing your audience strategically means taking their unique needs and preferences into account. If the opportunities do not address the needs of your consumers, they may drift away from your company.

Balance Logic with Emotion

Entrepreneurs who are mentally stable hardly fear to take calculated risk in marketing. They understand that taking calculated risks could stand between an ordinary and an extraordinary life. However, risk cannot be calculated based on the level of fear.

Examine facts instead by drafting a list of pros and cons for your advertising campaign. You need to cut through the competitive noise of ads by being logical in decision-making and how you view risk. If you are excited about exploring a new opportunity, you may overlook the risk.

Be Ready to Adopt Changes

For every successful business, risk is an ongoing process. It can introduce new markets and possibilities. Once you have implemented ideas, you may at some point need to alter them.

Developing a new product or service can be risky, and these risks do not just disappear soon after your business has left the ground. Your company will need to explore other markets. Even if you create a great product, notice that failing to have follow-on will not keep you ahead of the competition.

You need to invest in a family of products. Take a calculated risk by setting a plan that will help you to expand your product line.

Why Your Business Should Take Risk

Many entrepreneurs have ventured into the market to get their companies to where they stand now. However, this does not mean taking risks blindly and expecting excellent results. It is about careful planning. So, why should you calculate risk?

1. Your Business Cannot Stagnate

We are in an era of agile, where things move too fast. Tactics change and are quickly rebuilt to be more productive and profitable. If today your business is missing out on top-class ad trends and tools, you are slowly losing your competitive advantage. There is a good reason top companies keep changing their ads. They understand that the market is growing and new ways have to be explored to maintain good client traffic.

2. Every Business Takes Risk

Quitting from a well-paid position to start a business is a risk. First, if you have not been on the market before, your reputation is put at risk. You also spend a certain amount to get the business up and running through adverts. There are many other risks involved such as the hiring of employees and investing in customer service.

3. To Eliminate “What If” in the Future

Starting a business and determining risk does not guarantee the risks will pay off. Calculating the risks heightens the chances of success. Although not every risk will pay-off, risk-takers take failure as a learning opportunity. The willingness to implement new ideas is an opportunity to grow business.

Now that you understand why taking calculated risk is critical begin auditing your campaign strategy. Different strategies and outlets can be approached to help you capture the needs of your target market.

The trick to successfully taking control of your finances

When it comes to learning to masterfully control your finances, it goes without saying that it is a learning curve. It is an unfortunate reality that the world revolves, for the most part, around the give and take that centres around financial currency. This means, at the end of the day, that it is practically impossible to escape the necessity of having your own financial backing, and being able to adequately handle that backing on an ongoing basis. Companies like Money Task Force are perfect for helping to bridge the gaps, but you should know how to handle your finances yourself for the most part.

People are often easily frustrated when handling their finances, because it can often seem like their finances are chaotic to handle. While it is certainly true that, if left unchecked, finances can be an especially chaotic subject to handle, if you stay on top of them they can actually be quite easy to adequately maintain and grow. So, what is the trick to successfully taking control of your finances? Ultimately, it comes down to three steps.

Create a self-imposed budget and work to actively stick to it

Before anything else, self-control is crucial. It can take some trial and error to work this through one’s mind and to realise the truth of it. Often what happens is that when someone gets a payday, they find themselves excited and end up overspending before they even have a chance to regulate that pay check into compulsory bills and other costs, spending money, and savings. This often (if not always) leads to a distinct imbalance in income, and savings – even if one is living generally quite within their means.

So, to get a handle on your finances, start by working out a self-imposed budget. This is the budget that you create for yourself. Separate your paycheck into different categories, always starting with the compulsory costs like bills and the like. From there, work in spending money, social money, savings for trips and holiday gifts, etc, and the savings pool that you are not going to touch – think of this like an additional Super…you can touch it, but treat it like you cannot, and watch it flourish and thrive.

Have separate bank accounts for everyday access, savings, etc

This might be obvious to some, but having separate bank accounts for everyday access and savings makes the world of difference. It is easy enough to spend haphazardly if all your money is in one place, but if you spread it out strategically over different bank accounts – even across separate banks altogether, at that – you will find that it is easier not to touch your savings. Out of sight, out of mind, as the saying goes. This is very important, and it is one of the most useful keys you can have that helps you to successfully handle your finances.

Set up direct debit so you can easily track ongoing expenses

Think about all the ongoing expenses that you have – bills, etc. These are payments that, like it or not, continue to come out of your account until they are paid off or you are no longer obligated to continue repayments. In setting up direct debits for these payments, you can click on ‘Upcoming payments’ in your bank app to get a real-time play-by-play of all the bills and upcoming payments that you have due soon. This makes it easier to keep track and thus stay on top of your repayments.

6 study tips for stressed students

It goes without saying that being a student can be a stressful experience. With so many assessments to study for and stay on top of, it can be easy to fall off the wagon sometimes. Thankfully, there are many effective and valuable study tips out there to assist in navigating your way through these decidedly stressful times. But with so many study tips out there, how can one tell which are the most effective of all? Well, these are the six most effective and popular study tips – especially for stressed students.

Plan the semester study sessions ahead of time

Believe it or not, taking the time to sit down and structure out your study sessions ahead of the semester’s start is one of the best study tips you can get. By organising as best you can ahead of time, you effectively allow yourself the time to get ahead. Map it out on a whiteboard in your study area, and copy it into a diary or your Google Calendar, so that as the semester progresses, you can fit in social and personal events around your study sessions and your work schedule.

Form a reliable study group

Forming a strong study group gives you the opportunity to bounce ideas and understandings of the course material off one another. This gives you a more wholesome perspective on the material, and allows you to look at it from multiple angles, rather than just the one perspective (i.e. your own perspective). As a bonus, your study group often become some of your best and most trusted friends in college.

Break assessments into segments

Sometimes a big assessment can seem particularly daunting. Breaking down the assessment into smaller segments is a fantastic way to alleviate the stress, while also ensuring that you are dedicating specific energy and time to each smaller segment of the assignment. When things look more manageable from the onset, they are easier to motivate yourself to complete – even if you are more stressed than usual.

Take breaks to fit in life

While of course the main sticking point of college is that you are focused, you also must take breaks to fit in life and everyday activities. Whether it is going to the gym, doing the groceries, having a family dinner, or even something as simple as reading a book that isn’t on any of your course material outlines, taking a break allows you to

Try CBD oil to help focus the mind

CBD oil has been found, time and again, in recent years to be a viable treatment for anxiety, depression, and other stressors. Making use of CBD oil to help focus the mind is a great way to push yourself into focus without doing anything too heavy to get there. THC-free, CBD is as organic a booster as you can find, and it also happens to be one of the most effective.

Step away from the books now and then

This might be the most surprising study tip of all, but sometimes the best thing you can do for your grades is to take a step back from the books for a while – even a few days. Essentially, this is the larger iteration of taking study breaks. Your mental health is just as important, if not more so, than your physical health – and it is certainly more important than academic success. Taking a few days for yourself allows you the head space and time to regroup and replenish your mindset.