With growing economic uncertainty during the COVID-19 pandemic, the financial landscape is shifting every day.
Whether it's dealing with sudden unemployment, ballooning debt, or expenses related to working from home, BNN Bloomberg wants to help Canadians navigate these uncharted waters.
That’s why we created Ask BNN Bloomberg, where you can have your personal finance questions answered by industry professionals.
Email or send your questions via video to firstname.lastname@example.org, and we will aim to answer them weekly.
Questions and answers have been edited for clarity. Last names will not be used.
Investing in a family RESP
Cam in Burlington, Ont.:
With three children (now 16, 10 and nine) and starting a Registered Education Savings Plan (RESP) early, it was a lofty goal for us to save $20,000 per child per year of university (assuming three kids at $20,000 for four years each) so, $240,000 would be our target. Very recently, we exceeded that and the current value is at $250,000 for our family RESP.
The question is, assuming there’s still time for the funds to grow (we may even likely pay for any post-grad studies), what should we do? We continue to contribute the exact max that would garner the max grant (about $625 per month to the family plan). Should we stop contributing or keep pushing to get the grant contribution and worry about divesting later when there may be leftover funds?
For reference, re-allocating the $625 to a Tax-Free Savings Account (TFSA) through a pre-authorized contribution would be good, but we’re maxed out there as well this year.
Lots of room in Registered Retirement Savings Plan (RRSP) we can contribute, but not sure if that’s the definitive way to go. Should we direct the funds elsewhere until we hit the lifetime limit for the grants? (June 16, 2020)
Mia Karmelic, senior financial consultant at IG Wealth Management:
Good job so far on your RESP savings. The answer to your question will very much depend on the big picture.
If your own retirement savings are well taken care of, then continue to stay within the RESP maximum, maximizing on those grants would actually make sense.
However, if your retirement savings still need a bit of a bump, I would encourage you perhaps to take the $625 or $7,500 per year, throw it into your RRSP; if you are in the top tax bracket you will receive roughly $3,700 back from the government as a refund and you can then use that $3,700 to then top up the RESP and receive the grant on that.
I would also be mindful of the 16-year-old’s portion to perhaps remove or scale back from the markets within the RESP given the volatility we’ve been going through.
It might make sense to protect that portion of the education savings as it will be used in the near future; not part of your question but I thought that was important to address.
I hope that helps but I do very much encourage you to speak to a certified financial planner for a more detailed response.
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Guidelines to collect CERB
Gerald in Toronto:
Someone I know has been collecting the Canada Emergency Response Benefit (CERB) and I'm wondering if they're technically eligible.
They quit their day job in January to pursue their dream in the arts full time. They have a corporation for their past art project that was completed two to three years ago.
From what they have told me within the past year, the art project has won some awards with cash prizes, but has yet to turn a profit (the original creation of the art project was funded by an arts grant).
They rationalize applying to CERB to me in this way:
- They have a corporation and can prove losses this year, since an arts dealer has replied to their email and said they are not acquiring new arts projects during COVID-19.
- They made more than $5,000 last year (presumably through the full-time job they quit).
As a tax abiding citizen, I'm a little shocked by their brazen attitude at applying for CERB, despite voluntarily quitting their job in January. I would be interested in your opinion on whether they are in fact eligible for CERB. (June 9, 2020)
Chantel Chapman, founder of What The Finances:
CERB is not a vehicle meant to fund our dreams, it’s really meant to provide support to those whose earnings have been impacted due to COVID-19. This one definitely sits in the gray area.
We may not know all the inner workings of this person’s financial situation but I’m going to do my best to unpack the eligibility based on my interpretation.
So they quit their job in January to pursue a new career. The government does say that you can’t involuntarily quit but they don’t specify a date, but it is implied that you shouldn’t be quitting to claim CERB. Because this person quit well in advance of CERB being available they have that going on their side to be eligible.
The second thing you mentioned was making $5,000 in the last 12 months. The government also doesn’t specify that it has to be from the same industry; all they say is that the income has to be from self-employed, employed, maternity or paternity benefits.
So if this person has a business and they can prove that COVID-19 is directly impacting their business’ ability to earn an income, according to the way that the guidelines read this person would be eligible.
However, when it comes to tax filing next year the government does have processes in place to be able to investigate further on whether someone was actually eligible or not, and if they find that there was a fraudulent application there will be consequences.
But if they find that someone has applied in good faith and they were just not understanding, they will not be unjustly penalizing people for that.
So for you, if this person is close to you and there’s a moral incongruence it may be worth having a conversation. You also have the option to file a complaint but you really want to make sure you have all your facts straight because the thing is we don’t always know all of the inner working details of someone’s financial situation (June 18, 2020)
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