from diapers to diplomas

Raising a family:

3

Most parents will tell you having

children is the most rewarding

and challenging experience life

has to offer.

SPECIAL REPORT

MP1224 (05/2010)

Raising a family: from diapers to diplomas is published by Investors Group Financial Services Inc. (in Québec, a financialservices firm). Head Office: 447 Portage Avenue, Winnipeg, Manitoba R3C 3B6. 1-888-746-6344. Québec Office: 2001 University Street, Suite 2000, Montreal, Québec H3A 1T9. 1-800-661-4578.

Insurance products and services distributed through I.G. Insurance Services Inc. (in Québec, a financial services firm).Insurance license sponsored by The Great-West Life Assurance Company (outside of Québec).

© Investors Group Inc. 2010. ™ Trademarks owned by IGM Financial Inc. and licensed to its subsidiary corporations.

Written and published by Investors Group as a general source of information only. It is not intended as a solicitation to buyor sell specific investments, nor is it intended to provide tax, legal or investment advice. Readers should seek advice ontheir specific circumstances from an Investors Group Consultant.

Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus before investing.Mutual funds are not guaranteed, values change frequently and past performance may not be repeated.

portion can be carried forward or,within limits, be transferred to parentsor grandparents. Interest paid on student loans will also generate a tax credit.

There is no federal tax credit avail-able for private primary or secondaryschool tuition, though some religiousschools can provide charitable dona-tion receipts for part of the amountspaid. Private schools may be able to provide receipts for part of the fees that represent child care such as school lunches or postschool child care.

Wills and Estate Planning

Your will likely requires revision now that you have children. Thismay include the appointment oftrustees to administer any testamen-tary trusts established through yourwill, and guardians for your minorchildren. These persons should beindividuals worthy of trust and ableto carry out the job required.

Although you should review yourestate plan regularly, you will particu-larly need to do so now. This isbecause your personal and financialsituation changes direction dramati-cally once children enter the picture.In addition to the possible changesin your will, and in re-designatingbeneficiaries for your investments,your estate plan may now require thepurchase of life insurance to meetyour objectives of providing anincome stream to a surviving spouseor guardian. Your estate plan shouldbe developed in consultation withyour accountant, lawyer and yourInvestors Group Consultant.

Since there are set-up costs andadministrative costs involved in trusts,your Investors Group Consultant canexplain how trusts can be used as partof your overall estate plan, and canwork with your lawyer to recommendthe best structure for you.

* CES Grant is provided by the Government of Canada

likely want to live in a neighbourhoodfilled with other young children. Notonly does this indicate a child-friendlyarea, but it will provide your childrenwith immediately accessible playmatesand young friends. It will also offeryou neighbours and potential friend-ships with other adults sharing similarchild-centred interests.

School Days— Once your childbegins kindergarten, possibly yourmost important consideration will beselecting your child’s school. Publicschool systems in Canada, largelylocally funded, provide excellent edu-cation, but programs can vary widelyfrom one school division to another.

You may also consider sending yourchildren to private schools. Fees forsuch schools can range from as low as$3,000 a year for day students to morethan $26,000 at some prestigious, fullboarding schools with strict academicperformance requirements. Many pri-vate schools admit some students forlower fees, dependent on familyincome levels. Some provinces permit“charter” schools run by groups of parents who espouse a particular philosophy of education.

Higher Education

The Sooner the Better— The earlieryou begin to plan for your children’sfuture education, the better you’ll beable to cover those costs. Bursariesand scholarships may be availablewhen your children are ready to beginpost-secondary education. Bursariesmay be conditionally tied to familyincome levels that could disqualifyyour children, while scholarships mayrequire high academic performances.Your children could take out studentloans to finance their education, butthis could result in them carryinghuge debt loads.

Registered Education SavingsPlans— For children who go on to post-secondary education, RESPs(Registered Education Savings Plans)can make a big difference.

An RESP enables the subscriber tomake contributions on behalf ofsomeone who intends to seek highereducation, including themselves ortheir children. Growth in the planaccumulates on a tax-deferred basis.There is no minimum or maximumannual contribution to an RESP. The lifetime maximum contributionfor each child is $50,000.

The Canada Education Savings Grant (CES Grant) and provincialprograms may provide additionalfunds. For more information aboutRESPs, CES Grant and provincialprograms in your area contact yourInvestors Group Consultant.

Investment Accounts— If you begina portfolio designed to save for uni-versity or college while your childrenare babies, you’ll likely favour equity-type investments (such as stocks and equity mutual funds), since overthe long term, the stock market canprovide better rates of return. If you’vewaited until the children are older,you may not have the time frame to ride out the ups and downs of amore aggressive equity portfolio soyou may be inclined towards morefixed-income investments.

Trusts— You may want to considerestablishing a trust for your children,to provide them with future incomeand provide you with the tax benefitsassociated with income splitting.

A properly structured “age 40 trust”will allow you to accumulate fundsfor your child, yet allow you to bene-fit from income splitting if equityinvestments are used. These trusts

allow trustees to control the fundswell into the beneficiary’s youngadulthood. They are generally suitedfor asset amounts over $25,000, andare especially useful for children with special needs.

Education Tax Credits— When your children attend post-secondaryschool, they may be able to receivetax credits based on tuition paid, aswell as an education credit for eachmonth of full or part-time attendance.These amounts are revised frequently;check with Canada Revenue Agencyor your Investors Group Consultantfor current information. If the studentcannot use the full credits, the unused

If you have a young family, you

need to protect them in the

event of an accident or illness

that may prevent you from

providing for them while they

still depend on you.

From diaper-stage on, your children’swell-being requires considerablefinancial expenditure. Your financialplan needs to provide for your chil-dren’s present and future educationaland recreational needs. You maydecide to move to a larger home or a neighbourhood with more to offeryour family. You’ll want to protectand provide for them, should youbecome ill, incapacitated or die pre-maturely. And you will begin to con-sider, now that you have heirs, thenature and extent of inheritances youwill want to leave for your children.

There are so many needs to meet andgoals to fulfill. Where do you start?

Do Your Homework

Maternity and Parental Leave—Federal employment insurance (EI)will not fully cover income lost by the spouse taking leave, which canextend up to a full year in someprovinces, before and after the baby’sarrival. The taxes deducted at sourcefrom the leave benefits may not besufficient to cover your total personalincome tax liability at year’s end.There are also income restrictions

which may require you to pay back EI benefits should your year-endincome fall above the cut-off point. Talkto your Investors Group Consultantabout potential tax impacts and try toset aside accessible cash in anticipationof that possibility.

Those who are self-employed or who do not pay into the federalemployment insurance plan will generally not have access to federalleave benefits. In this case, it wouldbe wise to build a sizeable emergencycash reserve to cover expenses untilyou are able to return to work.

Child Care— More families these dayshave two income-earners, and the primary caregiver for the child willlikely return to work within a year ortwo—or perhaps even sooner—afterthe child’s birth. Child care expenses(including the cost of a nanny) aretax-deductible on personal incometaxes at both federal and most provin-cial levels. The spouse with the lowerincome must claim the deductionwhich is based on that spouse’searned income. Tax deductions forchild care expenses are limited andvary according to the child’s age.

Your Family Safety Net—If you havea young family, you need to protectthem in the event an accident or ill-ness prevents you from providing for them while they still depend onyou. Life insurance and disabilityinsurance is usually a solid startingpoint. Stay-at-home parents shouldalso consider life insurance, remem-bering the potential need to replacetheir caregiving with professionalchildcare and domestic help, whichcan be costly. Your Investors GroupConsultant can complete an insur-ance needs analysis, and recommendthe coverage best suited for your personal situation.

Home Sweet Home— With childrencome lifestyle changes, and the biggestchange may well be your choice ofhome and neighbourhood.

You may decide to move to a biggerhome or a more “child-friendly”neighbourhood boasting good schools,community clubs as well as a widerange of sports opportunities andrecreational facilities.

Your son or daughter will interactwith others in daycare or childcaresituations, and in schools, but you’ll

THE COST OF KNOWLEDGE

Statistics Canada reports national average annual tuition has almosttripled, from $1,464 in 1990/91 to$4,524 in 2007/08*. That’s just tuition,without books, room and board, andtransportation.

Some universities cost more than others. Here’s a snapshot* of averagetuition for undergraduate education, for different provinces in the year 2007:

Canada $4,524

Newfoundland and Labrador $2,633 Prince Edward Island $4,440 Nova Scotia $5,878 New Brunswick $5,733 Quebec $2,025 Ontario $5,381 Manitoba $3,384 Saskatchewan $4,774 Alberta $4,964 British Columbia $4,855

Source: *Statistics Canada – The Daily, October 18, 2007