Author Topic: Canadian stay at home mom interested in beginners investing g  (Read 856 times)

Katiekatie

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Hello! I posted this in another section but realized it may have been better to post here, so this is a repost.

Hello, we are a 30 year old couple with 2 young children. Newborn and 2 year old.

I have about 40k in a tfsa account and $7500 in a family resp. Iam able to save about 1200 a month to invest from the Child tax benefit.

I know I should keep up with the saving. I have a lot to learn so Iam just reading as much as I can at the moment but would like some advice or feedback.

We have no debt, house and car paid off. We're able to save 40% of our income. We are a low income family. Iv never opened a rrsp because iv always been in the low bracket in income.

I'm looking into CCP option 1: tangerine investment plan.

Or should I just invest my money with GICs? Seems like the only thing I really understand... are gics no good? Obviously you can tell I'm very new at this investing thing.

Thanks! Any help would be really appreciated. I feel so fortunate to have found this forum. I would love too continue staying at home and raising my children until they go to school.


jooniFLORisploo

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #1 on: March 15, 2017, 01:52:53 AM »
Hi Katiekatie,

A paid-for house in Canada on a low-income! What a gift!

You're on the right track with everything, including the CCP reference. I essentially follow their model, though went with Option 3. I found both 2 & 3 to have a learning curve, yes, but doable.

No to GICs, unless you know yourself to have a need to uninvest after one of those short periods. i.e., If you're going long term (15-20 years or more) skip the GICs and go CPP options. It's not that they're "no good" per se, just that they have a different purpose than the long term investor plans for.

I love the book The Millionaire Teacher (a second edition was released recently) for learning about investing. It was the only one I could understand :)

Prairie Stash

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #2 on: March 15, 2017, 09:49:41 AM »
Hi Katie.

A TFSA for you and your spouse is the right move, you neglected their investments. With investments there are some tricks for married couples (common-law too) to save on taxes; the most obvious being have a TFSA for each. Next is spousal RRSP contributions, Spouse makes and claims the RRSP credit but the money ends up in your RRSP. Later on if you retire early this allows income splitting, it makes it easier to get the money out tax free. A more advanced strategy is early RRSP withdrawal, first wrap your head around spousal RRSP's. I'm not sure an RRSP makes sense for your spouse, your household income is low so that puts them in a lower tax bracket (CCB of $1200 means your combined income is low).

Open an account with Questrade, its free, works great but can be intimidating at first bit don't be put off. Where do you have your TFSA? its at $40k so the MER on the tangerine(1%) is already costing $400/year. Do you really want to pay $400 when it could be free? What else in your life do you spend $400/year on? It's like pulling off a bandaid; do it quick and get it over with.

Between your TFSA ($5500), your husband's TFSA ($5500), Kids RESP ($5000 max/year if you're efficient) there is a potential for $16,000 in investments; more than your CCB payments. After 14 years the RESP's will be fully funded, the match stops after you receive $7,200 and in my case that's more than my children will need for school (14 years contribution plus gains is a lot of cash). For the next 12 years if you don't have extra income you're very well covered. Do you foresee extra income at some point?

GIC's are only good for people who need the money in the next 5 years, typically for a house.

Goldielocks

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #3 on: March 15, 2017, 01:14:53 PM »
Hello! I posted this in another section but realized it may have been better to post here, so this is a repost.

Hello, we are a 30 year old couple with 2 young children. Newborn and 2 year old.

I have about 40k in a tfsa account and $7500 in a family resp. Iam able to save about 1200 a month to invest from the Child tax benefit.

I know I should keep up with the saving. I have a lot to learn so Iam just reading as much as I can at the moment but would like some advice or feedback.

We have no debt, house and car paid off. We're able to save 40% of our income. We are a low income family. Iv never opened a rrsp because iv always been in the low bracket in income.

I'm looking into CCP option 1: tangerine investment plan.

Or should I just invest my money with GICs? Seems like the only thing I really understand... are gics no good? Obviously you can tell I'm very new at this investing thing.

Thanks! Any help would be really appreciated. I feel so fortunate to have found this forum. I would love too continue staying at home and raising my children until they go to school.

Wow, Katie katie, you are doing awesome, I know we did not have that amount of cash flow to invest with kids the same age.

My two cents -- as you already have 40k, I would look at going into the CCP TD option.   Just set it up with the CCP recommendations for now.   Dollar cost averaging each month to the E-series funds have $0 trading commissions, which is great for low amounts.  That is as easy as the GIC -- even easier, as you don't have to go to the bank.     I do like the Questrade option, but it is a bit more work upfront to get to learning.  So your choice on how much you want to jump start the investment education.

When you are ready to learn / do more, you can with the TD account, just slowly, one step at a time, and they have nice investment learning videos. 

 IMO you have been pretty smart about the differences between TFSA and RRSP's, and have saved quite a bit, so you will have no trouble learning the next steps.

With low income, first max out the TFSA, just like you have been doing.  As Prairie Stash notes, between you and your husband, that is $11k per year of room, plus any room not yet maxed out.   This may take most of your funds.
 
Next - you have an even split choice between RESP and RRSP's (your husband's RRSP or a spousal RRSP for you).   If you invest in RRSP's then realize that the objective is to get the tax deferred growth right now.  Defer claiming the amount on your tax return (just report it, but defer claiming the taxes back)  until  you have a higher marginal tax bracket, especially if you think your income will grow and you are under $70k per year right now.    If you don't think income will grow, then claim it as you go.

RESPs -- Invest here once you have $90k in your retirement savings accounts --  compounding works best with time, and the last 5 years before withdrawal at retirement are dramatic to the impact on your retirement fund, so getting the money in early is very important.  $90k is the amount that if you stop adding to it now, and don't draw for 35 years, will give you a post 65 retirement income (including average CPP and OAS for a couple) of $50k per year in today's money -- AFTER TAX.   Pretty awesome, but needs a long time, tax deferred, to grow.

e.g.  save for a modest retirement for yourself first, then ramp up the $'s into the RESP's after a few years.   

Until you get to this level, just put $500 a year or so, per kid, into RESP, and it will be ready for your increased savings to it when they are 14 or so, and you have a better idea what you will do.   (Need to have the RESP in place before age 16, for the most grant money).   Be certain to claim any additional CLP, CESG, for low income families, if you are less than $45k per year, don't miss out on the free money!

« Last Edit: March 15, 2017, 01:20:22 PM by Goldielocks »

jooniFLORisploo

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #4 on: March 15, 2017, 03:40:59 PM »
Be certain to claim any additional CLP, CESG, for low income families, if you are less than $45k per year, don't miss out on the free money!

+1.

For this piece, it will matter where you are investing. For example, TD and TD Direct Investing are (at last check) very sneaky and yucky about this. i.e., They weren't allowing low-income families to receive the free govt money (!) unless they signed up for a high-fee investment account...which ate up the difference. So, my kid's RESP is at RBC Direct Investing. Don't let that throw you! It's still the CCP model! I just hold some accounts at TD DI and some at RBC DI, and purchase the ETFs at either. More learning curve, yep, but worth it :)

We're here for you to sort through it step by step.

Goldielocks

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #5 on: March 15, 2017, 06:05:05 PM »
Be certain to claim any additional CLP, CESG, for low income families, if you are less than $45k per year, don't miss out on the free money!

+1.

For this piece, it will matter where you are investing. For example, TD and TD Direct Investing are (at last check) very sneaky and yucky about this. i.e., They weren't allowing low-income families to receive the free govt money (!) unless they signed up for a high-fee investment account...which ate up the difference. So, my kid's RESP is at RBC Direct Investing. Don't let that throw you! It's still the CCP model! I just hold some accounts at TD DI and some at RBC DI, and purchase the ETFs at either. More learning curve, yep, but worth it :)

We're here for you to sort through it step by step.
I think they just changed a few months ago.... I saw an announcement, but you would need to ask TD.   Depending on the province there are other provincial education grants, too.

jooniFLORisploo

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #6 on: March 15, 2017, 10:25:10 PM »
I think they just changed a few months ago.... I saw an announcement, but you would need to ask TD.

Ooooh! Here's hoping they got ethical!

Prairie Stash

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #7 on: March 16, 2017, 11:11:01 AM »

 
RESPs -- Invest here once you have $90k in your retirement savings accounts --  compounding works best with time, and the last 5 years before withdrawal at retirement are dramatic to the impact on your retirement fund, so getting the money in early is very important.  $90k is the amount that if you stop adding to it now, and don't draw for 35 years, will give you a post 65 retirement income (including average CPP and OAS for a couple) of $50k per year in today's money -- AFTER TAX.   Pretty awesome, but needs a long time, tax deferred, to grow.

Until you get to this level, just put $500 a year or so, per kid, into RESP, and it will be ready for your increased savings to it when they are 14 or so, and you have a better idea what you will do.   (Need to have the RESP in place before age 16, for the most grant money).   Be certain to claim any additional CLP, CESG, for low income families, if you are less than $45k per year, don't miss out on the free money!
Goldielocks got me thinking - how much money do you want each child to have? I'm going to stop short of maxing my RESP because after a point they won't need the money for school. I figure $10K/year/child since they will live at home. Its a rough approximation of tuition and books. The children will be expected to top this up with summer jobs - likely another $4k/year from them. I believe in working for experience while not in school, often the child's contributions are forgotten when planning how they're paying for school.

These are the extras she alluded too:
Canada Learning Bond (CLB) is for low incomes - https://www.canada.ca/en/employment-social-development/services/learning-bond.html     

B.C., Quebec and Saskatchewan offer RESP top-ups. Alberta cancelled theirs due to a budget crunch.

Goldielocks

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #8 on: March 17, 2017, 01:51:22 AM »

 
RESPs -- Invest here once you have $90k in your retirement savings accounts --  compounding works best with time, and the last 5 years before withdrawal at retirement are dramatic to the impact on your retirement fund, so getting the money in early is very important.  $90k is the amount that if you stop adding to it now, and don't draw for 35 years, will give you a post 65 retirement income (including average CPP and OAS for a couple) of $50k per year in today's money -- AFTER TAX.   Pretty awesome, but needs a long time, tax deferred, to grow.

Until you get to this level, just put $500 a year or so, per kid, into RESP, and it will be ready for your increased savings to it when they are 14 or so, and you have a better idea what you will do.   (Need to have the RESP in place before age 16, for the most grant money).   Be certain to claim any additional CLP, CESG, for low income families, if you are less than $45k per year, don't miss out on the free money!
Goldielocks got me thinking - how much money do you want each child to have? I'm going to stop short of maxing my RESP because after a point they won't need the money for school. I figure $10K/year/child since they will live at home. Its a rough approximation of tuition and books. The children will be expected to top this up with summer jobs - likely another $4k/year from them. I believe in working for experience while not in school, often the child's contributions are forgotten when planning how they're paying for school.

These are the extras she alluded too:
Canada Learning Bond (CLB) is for low incomes - https://www.canada.ca/en/employment-social-development/services/learning-bond.html     

B.C., Quebec and Saskatchewan offer RESP top-ups. Alberta cancelled theirs due to a budget crunch.

In BC, the only schools that come close to $10k/yr for tuition and books are private colleges, and maybe business school.
BC runs $4500 - $6000 for tuition at capped appox 2% per year increases.  Room and board runs about another $11k per school year.

You will also get tax credits back for tuition and school, which will more than pay for the books and a bit of the tuition, too.  (but you need to pay up front).

So, $10k/year per kid may be on the high side of your plan.  Not a big deal if you have more than enough retirement funds, but kinda a big deal if someone is shorting their other goals to put money into RESP without a plan to use the extra monies.


Prairie Stash

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #9 on: March 17, 2017, 09:19:30 AM »
In BC, the only schools that come close to $10k/yr for tuition and books are private colleges, and maybe business school.
BC runs $4500 - $6000 for tuition at capped appox 2% per year increases.  Room and board runs about another $11k per school year.

You will also get tax credits back for tuition and school, which will more than pay for the books and a bit of the tuition, too.  (but you need to pay up front).

So, $10k/year per kid may be on the high side of your plan.  Not a big deal if you have more than enough retirement funds, but kinda a big deal if someone is shorting their other goals to put money into RESP without a plan to use the extra monies.
My apologies, I was accounting for inflation in my estimates. $6000 adjusted for 2%/year for 18 years will be $8569, plus books and other incidentals. My province isn't capped at 2% though, its been closer to 3-5%, they claim budget crises don't allow increases to university funding. Local situations differ and should be accounted for, obviously no one can predict tuition increases 10 years out so plans need to recognize future uncertainties.

Presumably if I contribute $2500/year for 10 years, with the 20% match kicking in $5000 I'll reach my $40,000 goal quite comfortably, it only needs to gain $10,000 in 18 years. I'm able to adjust it lower in a few years (kids age 8) if I feel its getting too large, or extend my contributions if I suffer poor returns. Luckily I have 8 years to figure it out, the only thing to know immediately is I need to contribute something or I'll never hit the finish line.

I think the 10 year timeline (or less) is pretty neat. Its a clear goal for me, my 4 year old could already have reached half her university funding (I'll confirm it in 4 years).

jooniFLORisploo

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #10 on: March 17, 2017, 09:39:17 AM »
We don't know what the future will bring, of course, but consider teaching your kids to apply for grants, too. My few uni courses were fully covered, with massive bonuses, 19 years ago and again currently. Lots of available money goes unaccessed.

daverobev

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Re: Canadian stay at home mom interested in beginners investing g
« Reply #11 on: March 17, 2017, 01:19:11 PM »
OP, Canadian Couch Potato is a good resource.

If you do nothing else, max your TFSA and split it 25% each Canada/US/Rest of world/bonds. Rebalance annually (the 25% is just a simple rule of thumb; you should work out our own preferred asset alloc... but 25% x 4 is perfectly ok, and basically what you'd get with Tangerine less the 1% fee...).
Lending Loop p2p lending in Canada; $25 bonus after funding $1500

Great Canadian Rebates good extra sign up bonuses on credit cards, among other things