Archive for October, 2009

How Does Guaranteed Investment Certificate (GIC) Work in Canada?

Thursday, October 29th, 2009

A Guaranteed Investment Certificate, or GIC is a type of Canadian investment in which the rate of return is guaranteed over a fixed period of time. This particular type of financial product is a relatively low-risk investment, and thus yields smaller returns than that of stocks, bonds and mutual funds. GIC’s are typically offered by banks or trust companies. These safe and secure Canadian investment vehicles earn interest at a fixed rate, variable rate, or based on a market-based index. Many Canadians view Guaranteed Investment Certificates an excellent choice for a portfolio that requires a measure of safety.

How do Guaranteed Investment Certificates Work?
With these products you will invest an amount of money (determined by you) for a period of time that is determined by the specific type of GIC that you choose. Typically these periods of time vary greatly and can tend to range anywhere from 1 day to 10 years. Investments with longer terms will earn more interest than short term ones. When your Guaranteed Investment Certificate reaches the end of its term (otherwise known as ‘maturity,’) you will be able to access not only your initial sum of cash, but the earned interest as well.

Some Canadian Guaranteed Investment Certificates require that the amount of money you invest initially remain ‘locked in’ for a minimum period of time (30 days for example). Other GIC’s will allow you to access your money before the maturity date. There are even Guaranteed Investment Certificates that allow you to add to your initial cash amount by making weekly, biweekly or monthly contributions.

Redeemable vs. Non-redeemable
Guaranteed Investment Certificates can be redeemable or non-redeemable. As aforementioned, there are some GIC’s which allow you to access your cash during the term. This is referred to as ‘redeemable.’ With redeemable assets, you will be able to withdraw your cash before maturity. Some redeemable GIC’s specify that you will earn less interest if you cash out prior to maturity. The non-redeemable counterparts do not allow withdrawals before the maturity date. Non-redeemable GIC’s may offer higher interest rates than redeemable ones.

This particular type of Canadian asset can be offered at either fixed or variable interest rates.

Fixed Rate GIC’s
With a fixed rate GIC, your money will earn interest at a set rate. That is, the interest earned will be consistent throughout the term of the investment. The benefit of fixed rate GIC’s is that you can predict exactly how much your total assets will be worth on the maturity date.

Variable Rate GIC’s
Variable rate Guaranteed Investment Certificates are either linked to the Canadian prime interest rate or to stock-market performance. With interest-rate linked GIC, you are guaranteed that your money will grow, but you will not know at which rate until maturity. With market-linked GIC’s, you can earn more interest if the stock market does well, but your initial investment will be protected either way.

Benefits of GIC’s
The most important benefit offered by this type of investment is safety and security. Your initial cash amount will be protected. With fixed-rate GIC’s you can also enjoy guaranteed growth and an easy way to project value at maturity. GIC’s are also known to offer excellent interest rates. Finally, GIC’s are typically pretty flexible investments. You can enjoy flexibility in length of term as well as how often you receive payments.

If you live in Canada and are interested in investing your money in a safe instrument, a Guaranteed Investment Certificate may be right for you. To find out more about what is available in your area, visit your local bank.

Whether you are looking for a mortgage refinance, fixed, variable, open or closed Mortgage loan, our financial Coaches can help you figure out which one is just right for you. We offer the most convenient GIC rates on the market


Question: What is the difference between a CD and a GIC?
What is the difference between a CD and a GIC and which is better when interest rates are climbing/falling.

Answer: CD – Certificate of Deposit. Time deposit with a US Bank.

GIC – Guaranteed Investment Certificate. Time deposit with a Canadian Bank.

Best rate depends on which country you live in. If you are in the US and put the money in Canada, and the Canadian dollar drops, then your “real” rate drops due to a change in value in currency, when you convert your Canadian dollars back to US dollars.

Question: What’s the difference between RSP, GIC and mutual fund?
And what do you recommend for someone who’s trying to save up for a downpayment?

Answer: RRSP – These are savings that are allowed to be tax deductible (to a certain point). They are usually for retirement. The money withdrawn is taxed though.

GIC – These will allow your money to gain a guaranteed interest rate for the term. These are available anywhere from 1-10 years usually, and the rate depends on your bank.

Mutual Funds: These work on the principle that the greater amount of money invested the more money can be earned. This is a collection of your money and other investors money that is managed by a 3rd party to maximize profits. However, some banks will guarantee, some won’t. However you can select what you invest in be it high risk/reward, or low risk/reward.

Depending on your own personal finances, how much you can contribute, the investment options available, your income tax bracket , the answer to which you should choose could differ. It would be best to make an appointment with a financial adviser.

Question: Are people from Ont. who are on ODSP allowed to have GIC’s or stock up to a certain amount?
I have someone wishing to give me either a GIC or a few shares in some stock. They figure that way I have something for when I retire, to help me out since I don’t have anything else. The question is whether I am able to have them without my monthly cheque becoming all messed up? Or in what ways it can affect my cheque depending on the amount?

Answer: I’m not on ODSP but a buddy of mine was and let me tell you, he almost lost his benefits because of non-reporting income. Here’s a suggestion, ask a friend to inquire with ODSP about GICS and don’t mention your name, since ODSP is provincial funding I suggest if they are going to get you a GIC or RRSP maybe out of province would be a good idea, or perhaps instead of GIC’s because of the economy the way it is how about Federal Bonds, maybe in a child’s name?

Question: Is an insurance or GIC with a named benificiary included in the estate subject to a will?

Answer: You can structure your insurance different ways.

If you have a named beneficiary (a person) the money flows directly to the beneficiary tax free and bypasses a will.

Should the insurance be payable to an estate then it will be subject to the will. Some people use an insurance policy paid to an estate to cover the taxes arising from the taxation triggered by a death. (ie capital gains on investments)

For GICs if they’re held solely in the name of the deceased they flow to the estate and will. If its joint it flows to the other joint owner, bypassing the will.

Question: In Canada, does one have to pay taxes for interest earned in a gic investment with Royal Bank of Canada?
Also, if I have no work income, no medical expenses, do I even need to declare?

Answer: Yes you have to claim it as income, although interest is not treated like employment income.
If you truly have NO income you still want to apply for GST credit, Social Assistance and other programs, and you need to have the current years taxable income for those calculations.
In doing your income taxes the GST and child and family benefits are how you apply.

Question: I live in Ontario Canada. How safe is my money in a GIC at CIBC?
If anything ever happened that the bank went down would I lose my money too?

Answer: If the CIBC, the country’s biggest bank, goes under we have much more important issues to worry about.

However, your deposit is covered up to $100,000 per account by the Canadian Deposit Insurance Corporation. 100% safe.

Question: Is it safe to keep my mutual funds or should I sell at least half of them and get things such as GIC?
Would I be selling my mutual funds at a very low value (since the markets have really gone down lately) or will I save some of it’s value (since the markets might get worse)?

Answer: Investing is never safe. It’s always risky. Having said that, if you sell now then you lock in your loss. If you can hold out for 5 years you will historically have recovered your losses.

The markets go up and the markets go down. Historically, they tend to go up. If you need cash and have to sell, then sell. If you can’t stand the risk and have to sell, then sell. Otherwise hang on, collect your dividend payments, and ride it out (We’re all in the same boat here). You may want to contact your financial advisor before making a decision.

Question: Where to find best GIC Rates?
I know there’s public posted rates but I hear there are also discount brokerages? What’s the difference?

Answer: All GIC rates are very low these days. Among the banks, the best rate I have seen is at Canadian Western Bank: about 3.5% for a 5-year term. ING Direct might be about the same. Credit unions like VanCity also offer slightly better rates than banks.

Canadian Taxpayers – Registered Retirement Saving Plans (RRSPs) Explained

Thursday, October 29th, 2009

The story and example has been retold many times of a son who had taken the time to count up his parents net worth whom it seemed to be strung across town in a myriad of small bank accounts and as well in saving bonds. When the son explained to his father, the net worth of his wealth in total the father exclaimed – “We’re not rich. We never had money”. Father the son explained “Did you ever hear of the power of compound interest? You had the power of compound interest working for you.”

Canadians now have the RRSP (Registered Retirement Saving Plan) season on the way. Indeed few nations on earth allow their citizens such an investment spiff. Put away income at your time of highest earning. Allow it to grow and compound over time, tax free, sheltered of income and growth robbing taxes. The Canadian government is hoping and betting that first of all you will thus have a nest egg to live on and not be dependent on social programs which the government would have to provide to retirees.

This lightens the load for the Canadian government. It provides for a stable base for investment sources – for banks and other financial institutions to have a stable source of long term investment capital for mortgages and long term capital investment. The private investor does pay tax in the end – the government does collect it. However its is down the line when first of all the retiree will generally be taxed at a lower rate than their peak working years and the saving fund will have grown considerably with time and compound interest. Everybody wins so to speak and younger people at that point will benefit by having other people in their communities with money to spend for good and services – providing employment for the then younger generation.

What are the basic rules of Rasps for Canadians? First of all know your limits. Its crucial and the first step to know how much contribution room you have in dollars before sitting down to plan or buy RRSP financial instrument contributions.. This will actually be listed clearly on your last year’s personal tax assessment from Revenue Canada. If you are unsure, or want to verify the amount, there is always a phone number or even an email address to contact the government agency.

Next contribute as much as you feel that you can spare. Remember a dollar saved or contributed is worth more than dollar invested. First there are definite tax savings. Next the money is sheltered from taxable interest. Even if you earned money in the bank or in Canada savings bonds as interest a good portion would go to pay the taxman, at your highest marginal rates. Most people spend close to their limit. If you do not the funds you will not or cannot spend them. An RRSP is a long term savings plan – not a piggy bank. You can withdraw savings in most cases. However you will pay your current high tax rates on withdrawals as if was income. It’s best to leave some savings outside your Registered Retirement Saving Plan.

Contribute early – both early and earlier in the year than most. Contribute early in your life in possible. This way you have the great and wonderful power of compound interest working on your behalf with all its power.

What are the flip side and the negatives about RRSPs? Most people it seems never get around to contributing so this is often the least of most people worries. However two points should come to light. As with any investments you have the choice of risk rewards. If you choose risky investments then pay heed to the risk factor that you are playing with your retirement nest egg. If you are young and have time to recoup any lost capital that is fine. However if you are on the home stretch don’t try to make up for lost time or be greedy.

In the end the summary of Canadians investing for their retirement nest egg through the vehicle of a Registered Retirement Income RRSP plan ahead , save early , save often and contribute as much as you feel that you can.

Shaun Stevens Winnipeg Manitoba Canada St. Boniface Budget StBoniface Economy Hotel


Question: What is the maximum allowable RRSP contribution in Ontario Canada?
Can I put in as much as I want? Also, if I haven’t put much money into RRSP’s over the past years can I put in for past years?

Answer: The maximum is 18% ($20K max) of your T4 income from last year minus any pension adjustments from an employer sponsored pension plan (if you have one).

As for the past few years, the amount that you did not contribute carries forward. When you filed your income taxes last year, the Notice of Assessment that was eventually mailed to you would have your unused amount. Alternatively, you can call the CRA or check online.

Question: How does a RRSP catch up loan work?
I haven’t maximized my RRSP contributions in the last 6 years. I’m planning to get a loan to catch up. Will my refund be equivalent to the amounts that I would have received if I had made these contributions during those years. Will I get a lump sum or several smaller amounts over a specific period.

Answer: In my opinion, I think you should be careful before you take out a loan to catch up on RRSP contributions. There are several pieces of information you need to consider – at what interest rate is the loan? And what is your marginal tax rate? Go see an independent tax professional (like an accountant). Don’t go to the bank for advise! I’m not a tax expert, but I think the loan idea for the RRSP really works to your benefit if only you can pay it all back in the same tax year.

Question: What can you tell me about opening an RRSP?
I am 25 years old and I am thinking about opening up an RRSP. How does it work? I’ve only heard of it from a financial show I’ve been watching and they say if you invest about $200 in an RRSP a month, in 40 years you could have a huge chunk of cash to retire on.

Answer: The basic concept of an RRSP is that you place money into a segregated fund, receiving a tax deduction for doing so (it’s the same as earning the money tax free) where it accumulates interest of other gains tax free. When you withdraw the money 20, 30, 40 yrs later, you’ll pay tax, but you will often be in a lower tax bracket by then and will thus pay less tax. There are tons of RRSPs around, you can pick and choose. Starting at your age, you can indeed accumulate a large portfolio by the time you’re ready to retire, even with a minimal return. The sooner you start, the better you’ll be in retirement. To use your example of $200 per month, at even a 1% return, you’d have $118,000 40 yrs from now. With a 5% return, it would be $306,000.

Question: What criteria is important when choosing an institution for an RRSP?
Im looking to start an RRSP but so many places are offering different ones. I’m not sure how/who to choose and whether to have more than one RRSP at different institutions, or to have all my investments in just one. Any thoughts?

Answer: Well it depends what kind of RRSP are you looking for: mutual fund, direct investing (stocks).

For funds you’re looking for a combination of performance and management fees. Also pick the bank that will allow you to buy the funds you want if you’re looking solely at bank mutuals. TD has the efunds which have the lowest MER in Canada (0.5%) which are available solely through a TD efunds RRSP.

For direct investing, there is often a $50-$125 annual admin fee. My bank waived mine because I have my mortgage with them.

The CIPF protection is currently $100k per account. So I would be wary of placing more than this limit in one institution.

I have 3 RRSPs at three different institutions. All for different reasons:
#1 ) RRSP for my employers group RRSP plan
#2 ) RRSP direct investing at my bank
#3 ) RRSP directly with a fund company for access to their funds.

Question: Is a spousal rrsp safe from the ups and downs of the economy?

Answer: No RRSP is safe from all ups and downs in the economy if it is invested to earn a reasonable rate of return. That said, it would still be prudent family planning to build a spousal RRSP if your spouses do not have income to build their own. It helps to distribute retirement income.

But you still have to choose investments wisely to hopefully have something close to secure future. You can buy an insured RRSP, a segmented fund investment. The principal is insured at the end of a 10 year period it will not be worth less than at the beginning.

Question: Can anyone give me some ideas to diversify my RRSP to include holdings outside of Canada and the US?
I have about $10K to work with in a self-managed RRSP. I’m comfortable doing Fundamental Analysis of Oil & Gas companies or Mining companies. I’m also comfortable with basic Technical Analysis techniques. I hope to find something that returns 15% or better per year.

Answer: I don’t have specific stock recommendations, but have you looked at iUnits? They’re exchange traded funds that I believe give you exposure to the US market while not violating the foreign holdings rules of RRSP accounts. iUnits are managed by a division of the largest ETF provider in the US (Barclays) and are similar to their US counterparts, iShares. Of course, these aren’t likely to return 15% EVERY year, but they do offer less risk than individual stock holdings.

Question: Does anyone know a formula to calculate how much $ I should put into an RRSP to offset a huge annual CRA debt?
I always end up owing the government between $4000 – $5000 each year in Income Tax. This year I have some extra money and wonder how much I would have to put into an RRSP by the end of this year in order to not owe the government next year. Does anyone know how to calculate this by chance?

Answer: Step 1. How much can you invest and not impair your day to day life? Paying no tax on filing does you no good if you cannot make mortgage payments.

Step 2. Look at last year’s assessment to see how much room you have available.

Step 3. Look at last year’s tax return again and see your federal tax calculation. Look at your top two rates. See how much federal tax you would save if you reduced your income by the amount in the two income levels. Add the provincial factor. For instance if your provincial rate is 50 per cent of federal, the tax savings would be 150 percent of federal.

Or if you care to spend a bit of money, buy a piece of software and plug in the amounts both with RRSP deductions and without. I use Quicktax, you can run a sample tax form, with all this year’s data. It will first of all tell you what you’ll owe this year, and second, it has a handy RRSP tool that let’s you play with sample RRSP contributions to see how much you’d save. In fact, it has a simple suggestion that will tell you exactly what to do in your situation: how much to contribute to have zero owing.

It sounds as though you have two (or more jobs) and not getting enough deducted at source. Check they have the correct TD1 for your situation.

Question: Can I withdraw from my RRSP when my work permit expires?
I’m coming to Canada on a temporary work permit. I’ll be staying for at least 2-3 years during which I’d like to use an RRSP. If I should decide not to prolong my stay beyond that, can I terminate the RRSP when leaving the country without penalty?

Answer: If you leave the money in the RRSP, there should be no penalty. How the RRSP is treated in your country when you draw money from it in the future is another question.

If you take the money out of the RRSP at the end, it will count as income and be added to any money that you earned in Canada.

If the amount you wish to put in an RRSP is less than 5000 a year, you may be better off putting the money in a Tax Free Savings Account. At least you won’t be taxed on the money you take out of it at the end. The only negative thing is you won’t get the deduction for putting money into it.

Another way of thinking it: If you put money in now, you get the deduction. When you take it out later, you’ll get that deduction taken back.

RRSP’s also have a limit based on how much you made the previous year. Assuming you have never worked in Canada before, your RRSP limit would be zero for the first year you work here and you would run a tax liability if you contributed because you would be over contributing.

Canada Savings Bonds – Learn All About The Canada Savings Bond

Thursday, October 29th, 2009

The Canada savings bond is offered by the government of Canada to investors from early October through April 1. These bonds were introduced in 1946 under the name “Victory Bonds” to serve as a viable and secure option for investors who wanted more security than mutual funds or stocks could offer. Before this time, however, Canada had trading instruments that were similar to Savings Bonds, such as the Canada Fourth Victory Loan of 1943 and the Canada-Dominion War Savings Certificate, issued in 1944.

What are the different types of CSBs?

1) The Canada Retirement Savings Plan (RSP): This is a no cost RRSP (registered retirement savings plan) implemented for carrying Canada Premium and Canada Savings Bonds.

2) The Canada Premium Bond: This provides a fixed rate of return in regular and compound interest.

3) The Canada Retirement Income Fund (RIF): This is no cost fund implemented for carrying the Canada Premium and Canada Savings Bond.

The Canada Savings Bond and the Canada Premium Bond are very similar; however the Savings Bond can be cashed at any time of the year, while the Premium is cashable only one time a year. Either bond can be purchased with a registered retirement savings or a retirement income fund. Premium bonds will always have a higher interest rate than those of Savings bonds sold at the same time. They can be purchased in compound interest form or simple interest form, and one kind can be exchanged for the other at any time.

Why are the Canada Savings Bonds popular?

One reason that Canada Savings Bonds are popular is the security they offer to investors. Since they are backed by the government, they make an excellent addition to the secure portion of any portfolio. In addition, Canada Savings Bonds have a guaranteed interest rate: they can increase along market lines, but never fall below a stated percentage for each investment period. They are an affordable option for almost everyone, with prices as low as $100.

Who is eligible to purchase these and where can these be bought?

The Canada Saving Bond, which is available only to Canada residents, can be purchased on-line, on the phone, in person at a bank or from an investment broker during its six-month enrollment period. It can even be acquired through a direct payroll deduction, making them accessible to just about everyone in the country. And, there is no brokerage fees involved in purchasing a Canada Savings Bond. With millions of Canadian investors purchasing bonds every year, the security of these bonds will continue to strengthen portfolios of investors around the country.

On you will find articles on insured municipal bond investments and canada savings bonds.

Canada Savings Bonds FAQ:

Question: What happens when Canada savings bonds mature?
I have Canada Premium Savings Bonds that mature in November, what happens when they mature? Do they continue earning interest? Does a cheque get mailed out to me?

Answer: No they stop generating interest. You just take them into your local bank and cash them in for the principal and interest.

Question: Can the Canada Savings Bonds be seized in bankruptcy?
I am thinking of enrolling in my employer’s payroll savings bond programme. I anticipate making a proposal to creditors and/or declaring bankruptcy in a year. Is money I invest in the savings bonds protected at all? Does it make a difference whether I buy the bonds for myself, jointly, or for another person?

Answer: It can be seized. Buying it for another person means you lose control of the asset, and ultimately, the courts could view that your intent was to avoid creditors. A Trust could be an option.

Segregated Funds have creditor protection as long as you have a preferred beneficiary, and you purchase it long before you file for bankruptcy. The underlying investment in the Seg Fund investment can be guaranteed interest terms or it can be a Mutual Fund if you are looking for greater potential returns.

Now, in your case, you intend to file for bankruptcy at some point, that will pose some issues. You may want to consult with an Estate/Tax Lawyer, but from my understanding, if your intent was to avoid creditors because you knew you were filing at some point for bankruptcy, and the Courts/Creditors can prove that intent, then the creditor protection under the Insurance Act for Life Insurance or Segregated Funds would not protect you.

Question: Canada savings bonds how do you calculate what it is worth?
I got each of my kids a $100 savings bond in 1996. How much are they worth now? How do you calculate it?

Answer: They usually send you a note every year (when they are still in effect), plus there is usually that 1-800 number listed on the bond itself so you can call just about any time and ask. You could also ask at your bank.

Question: Why do Canada Savings Bonds tend to be safer than corporate bonds?

Answer: You would assume that a Government bond is safer than a company (corporate bond). In fact most Govt Bonds are assumed, or treated as risk free. Is the Canadian govt. likely to default on the interest payments?

Question: Can someone help me understand Canada Savings Bonds?
For example, what exactly is the “issue date” and the “maturity date”… and how long do I have to save for?

Answer: The bonds actually vary in how long you should save them for. (That “term” is the time between the date the gov’t issues them and their maturity date — when the gov’t pays you back the principal and interest.)

Question: What are features of a Canada Savings Bond that differentiate them from true bonds/debentures issued by the Government of Canada?

Answer: You are requesting a very specific answer to a highly technical subject. You would be better seeking this information from an investment advisor.

Canada Savings Bonds are low interest savings vehicles. They are available for set term limits with either annual or compound interest.

Question: Why do most corporation bonds pay a higher rate of interest than Canada Savings Bonds?

Answer: There are four reasons why Corporate Bonds pay a higher rate than Canada Savings Bonds.

1. Default Risk. The government guarantees that savings bonds will be paid — but if a company goes bankrupt, bondholders may not get paid.

2. Liquidity. Someone selling a corporate bond may not be able to find a buyer easily — while savings bonds can be turned into cash at any time.

3. Taxes. I’m not sure about Canada — but in the US, you don’t have to pay state or local taxes on government securities — but you do on corporate securities.

4. Interest rate risk. Savings bonds are usually short term — so do not lose much value if interest rates rise. Corporate bonds are usually longer term — and lose a lot more value if rates go up. Investors demand to be compensated for this price risk.

Question: How do I go about getting a canada savings bond?

Answer: Go to your bank or financial advisor or ask your payroll department at work.

Faxless Payday Loan Canada – Relief From Cash Crisis

Wednesday, October 28th, 2009

All of you, who have been facing cash crunch often, and don’t know where to look for immediate help, can relax. That’s because, faxless payday loan Canada is there to help you now. Unlike, conventional loans, there is no running around to be done here. To apply for an instant payday loan in Canada, all you need to do is fill an online application. You can borrow up to $1500 with faxless payday loan Canada. The application is easy and requires only some basic information from you. You wouldn’t have to run from pillar to post, seeking payday loans. Sitting at home, the loan is just a click away.

Eligibility Is Simple

If you are worrying about eligibility for faxless payday loan Canada then stop right now. Eligibility is very basic, so that a great number of people can benefit from it. One needs to be above 18 years of age, a Canadian citizen and should have an average monthly salary of $1000. If you match these requirements, then your application will fetch you instant approval. Once this is done, it’s going to take only a few hours to transfer the money in to your account! Amazing isn’t it? Low cost payday loan in Canada is for the express purpose of providing immediate financial relief, at an affordable rate.

Quick And Efficient Loan

Faxless payday loan Canada is an efficient, reliable, and quick way of borrowing money, when you need at a really short notice. Living from paycheck to paycheck is often tough on the budget and in more cases than one, unforeseen financial crises come up. Be it a medical emergency or pending bills, or a car repair job, instant payday loan in Canada is for one and for all. Don’t worry, if you have to finance your vacation or a shopping trip, faxless payday loan Canada is available for that too.

People with bad credit too can breathe a sigh of relief. That’s because low cost payday loan in Canada is there for them too. This is a two in one golden opportunity for them, as not only can they borrow money; they can also improve their credit score. Instant approvals and quick disbursal of money are the characteristics of this loan and you no longer have to wait for ages for approval. The speed at which you can get the money with faxless payday loan Canada is as though you never faced a cash crunch. The usual term of the loan is 1-2 weeks, but this can be extended up to a month on payment of some extra fee.

Faxless payday loan Canada is a quick and efficient way to borrow money for short-term cash needs. Affordable and speedy, this instant payday loan in Canada has basic eligibility criteria. So whether you want to improve your credit score or just want to binge shopping, go ahead, take a low cost payday loan in Canada. For more information visit best payday loan

Payday Loan Canada FAQ:

Question: Payday Loan question. Please, no lectures about the pitfalls of payday loans, believe me, I know!
If a person has a payday loan through Money Mart Canada branch, are they able to get a 2nd payday loan thru a different Money Mart branch? I know that the SAME branch won’t give you a 2nd loan till the first one is paid off, but I have an emergency that I need money for this month and I’m desperate to get a second loan.

Answer: They absolutely love people who are DESPERATE so yes You can get another elsewhere (another company) but only someone unwilling to find a way out without getting in deeper will want or take one out.

Question: I’m looking for good cheque cashing and payday loan software in Toronto, Canada. Anyone knows a good one?

Answer: Smart Cashing Enterprise is not bad, I have been using this application for 3 years for my two locations. These guys have been doing this for 7 years.

Question: Payday Loans for people on disability in Canada?

Answer: I think that the best thing to do is to just save up a little money. If you are out of work then use the loan cautiously. Maybe you could borrow from a friend or get a credit card instead.

Question: Suing payday loan company
To make my story short, 2 years ago I borrowed a payday loan from Cash money company. Due to some unexpected difficulties with cash flow, unfortunately I defaulted on my debt and had to deal with collections agency. I did settle my debt with them and thought that it is the end of the story. However Cash Money tried to debit my account 5 months later for 1/5 of the amount I borrowed from them. I did provide them with the release letter from collections agency and never heard from them for about a year. Shockingly they again tried to debit my bank account just a few days ago. Here is my question. Since they SOLD my debt to collections agency, did they have any rights to the “outstanding debt”? Second thing, do I have a good legal ground to take them to small claims court? Pretty much now they’re simply trying to steal the money from my bank account.

Answer: Payday loan companies are notorious for coming back and taking additional funds from your bank account. If you paid off a collection agency, the original creditor cannot come back and collect the same account. But payday loan companies really don’t mind not following the rules.

Did your bank return the money to you? And have you closed that account?

You can try to sue them but I suspect it will be a complete waste of your time. You can sue them for the amount they took from your account but even if you win the suite, you still have to collect from them. Something you may find to be much more difficult than you think.

Question: Cheque cashing questions in Surrey bc Canada?
Excluding money mart does anyone know of a cheque cashing place that would cash a personal cheque I can write to myself? Also can a person get two payday loans at two different money marts.

Answer: There are several different places that are like Money Mart, but it sounds like you have a bigger problem. I went to Credit Counsellors of BC and got help.

Question: We need to do something about these fraudulent loans?
I was in need of money fast, I did not want to go through a payday loan cause the charges are ridiculous, so I went and did a google search for loans with people with bad credit. It says the name of the business is FINANCIAL BENEFITS, I put in my application and it stated someone would contact me shortly. The next day I receive a call from Susan Moore stating she is with Financial Benefits and I have been approved for a $5000.00 loan at 6 % interest and my monthly payment would be $165.00. Then she stated I would have to send 525.00 via moneygram to Mark Clark in Canada which I did. I called susan to give her the pin she stated I would receive call from lender telling me where I can pick my money up, I still have not heard from anyone. The agency’s say I will never get my money back and they have lots of cases, its time for payback!

Answer: It is extremely doubtful that you are going to get your money back. The fact that she offered you 6% on an unsecured loan should have been a ‘red flag’ that something was wrong. Your best bet would be to contact the police and file a complaint. In the future – ensure that no money changes hands without a signed contract. And do not do business with any company that you cannot verify is legitimate.

Introduction to the Canadian RESP Account

Wednesday, October 28th, 2009

The Registered Education savings Plan (RESP) account is an investment vehicle that is designed for college planning. Parents, grandparents and other family members often desire to financially contribute to a child’s future higher education costs. As Canadians desire to plan financially for their children’s high education costs, the RESP account is a popular investment tool to utilize for the purpose.

The RESP account offers individuals several tax benefits when they utilize the account for higher education purposes. The primary tax benefits include tax free growth and tax free withdrawal when the funds are utilized for qualified higher education expenses. There are several important regulations to become familiar with for the RESP account:

  • Contribution Amounts- The maximum total contribution per child into the RESP account is $50,000. There is not currently an annual maximum contribution limit, although when they account was initially created, there were annual contribution restrictions to adhere to.
  • Account Beneficiaries- The account must be registered with a beneficiary. This beneficiary must be a child with a registered social insurance number. Each child may have more than one account established, allowing multiple family members to create accounts to aid in the future higher education costs.
  • Age Restrictions- The beneficiary listed can access the funds for higher education purposes at any age. But, the funds must either be utilized or the account must be dissolved before the beneficiary reaches the age of 25.

Contributions into the RESP account are not tax deductible. But, the tax free growth allows the funds to grow more quickly than they would if they were in a taxable investment account.

For individuals who are looking to establish a RESP account, there are a variety of financial institutions that they can establish this account with. Some of options for establishing a RESP account include banks, credit unions, mutual fund companies, investment houses and trust companies. Each type of financial institution will offer a variety of investments to use within their RESP accounts. So, when selecting a financial institution, be sure to evaluate which accounts are the best match for your financial goals and needs.

Most financial institutions will offer a variety of investments to select from within their RESP accounts, including securities, bonds, mutual funds and cash. So, account holders have the option to develop an investment diversification that matches their risk tolerance and their investment time frames.

Canadians need to save for many different purposes over their lifetimes. In addition to RESP accounts reducing taxes on savings can also help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.

Download your Free Special Independent Review of the TFSA at:

Registered Education Savings Plan FAQ:

Question: Why can’t they make Registered Education savings plans tax free?

Answer: RESPs ARE in a sense tax-free in that once you contribute to one for your child it grows tax-free. Growth and grant when removed from the plan to pay education-related expenses are taxed in the hands of the student. Typically, students have little or no income at the time and will pay little or no tax. What you as the contributor are NOT getting is a deduction against income on your tax return as you do on Registered Retirement Savings Plan (RSP).

Now, if your question is why is that? Well, simply put the government has calculated that it will cost a considerable amount of money in lost revenue if they do that. In addition, they are already offering a good incentive by providing the Canada Education Savings Grant otherwise known as free money from the government by contributing to RESPs.

Question: Which RESP fund company (bank) to choose in Canada?
We are to invest in the RESP (registered education savings plan) for our baby. We have been approached by a sales person of Heritage education funds, Canada. Anybody to comment on this company? Also, what were your choices in selecting the institution to work with in RESP and why?

Answer: I’d go with an institution in which you can select your own investment funds from brand name fund managers (ie: Fidelity, Templeton, McLead Budden) rather than Heritage Education Funds investing it for you.

Question: Should I worry about having enough money for university?
I’m a 16-year-old girl. I’ve had several jobs starting from when I was 8 years old, and I’ve saved all the money I’ve earned over the years. My parents have put all this money into Canada Savings Bonds, mutual funds, and GICs. Right now I have about $15 000 saved up. Whenever the total money in my bank account reaches $500, I invest it somewhere else because my bank account doesn’t have a high interest rate. My parents have also started contributing to an RESP (registered education savings plan) in my name and so far there’s about $10 000 in it. Should I worry about having enough money for university, and what should I do about it? I really don’t want to have to get a loan.

Answer: I think you are doing just fine. You sound extremely smart! If you started working when you were 8 years old, you must really want this. I definitely think that you will earn enough money. Since you are only 16, you still have some time left. I wish the best of luck to you! Another option you may want to consider is the military as your entrance into the world of medicine. They might pay for everything if you agree to serve for 5 years as a doctor.

Question: Is this a scam, Canada education plan?
Is it normal for someone to visit your home from canada registered savings plan? I just had a baby (1 month )and already have one (3 yrs), I didn’t get around to saving up yet for them. I recieved a phone call from someone saying they were from canada registered savings plan but she wants to come to MY home and give me a 20 min presentation and this can’t be done over the phone. I’ve tried looking online and can’t really find anything related to this.

Answer: Well, yes, this did happen to me and I did start an RESP for my daughters post secondary education.

Question: My father want his RESP money back, even though I’m not living with him anymore.
I changed the address with the RESP company, he called and changed it back. I wondered why I didn’t get the cheque, so I called them and the address had been changed back, and they resent me the check. Since the money is in my name and I pay taxes on it, I have been keeping the money, but he is becoming more and more persistent to get it, even though it is in my name, and I am not allowed to give it to him for tax reasons, and that it is part of the contract.
How can I get him to stop harassing me? I called the company, and they have clearly stated he can not get the money, yet all he does is yell and raise his voice. He is stubborn and will not listen.

Answer: No one can harass you or give you a hard time unless you let them. It was his decision to save the money for you, he signed the contract, so he must know that the money can not go back to him. Remind him of this. Can your mom reason with him?

Universal Life Accounts and TFSAs

Tuesday, October 27th, 2009

The Universal Life Accounts that Canadians hold are insurance policies that allow Canadians to take advantage of higher returns within the financial market. Most individuals who have Universal Life Accounts are the same individuals going after TFSAs because they want their money to grow and grow. And those with TFSAs are finding that they can acquire even more tax savings by opening up a Universal Life Account.

Universal Life Accounts are insurance that has cash value. These are very beneficial accounts in that an individual’s premium may be taken from their cash value if they don’t make their premium payment. This keeps the policy from lapsing. As for how the policy gains cash value, any payments made above the premium are credited to the cash value. The cash value then gains interest each month. The insurer will determine the interest that is credited to the account, but it is sometimes based on what the financial index or another interest rate index.

Similarities between Universal Life Accounts and TFSAs

There are some similarities between Universal Life Accounts and TFSAs, it is the tax benefits. This is one reason why you find individuals going for both of these accounts. Individuals receive life insurance and a sort of savings plan through their Universal Life Account and they also receive quite the savings plan via their TFSAs. These are great monetary vehicles.

As for the tax benefits, individuals are able to access their cash without paying tax. There are some limited cases in which the policyholder can access their money tax free. But with a TFSA, the accountholder can access their money tax free all of the time. The contributions are tax free and the withdrawals are tax free as well. This allows an individual to keep more money in their pocket. Both accounts place more money within the pockets of Canadians with these accounts.

Tax benefits

The tax benefits of TFSAs are quite obvious. Universal Life Accounts provide an individual with the ability to purchase life insurance in a tax-advantaged way. In the first years of the contract, the premium amount exceeds the cost of the insurance charges. The difference between the two amounts will be tax-deferred during the life of the policy. If an individual holds the policy until their death, then the cash value will not be taxed at all. Since you pay tax on investment growth anyway, it is actually rather rare that an individual has to pay tax on these policies. They usually do escape taxation.

Both Universal Life Accounts and TFSAs offer great ways to make money grow and to save money on taxes. That is why it is a good idea to have both types of accounts because you are covering several areas of your life by having these accounts. You can gain cash value in both accounts and one of them provides you with life insurance. And they both offer you various tax benefits, saving you even more money so that you can keep it in your wallet.

Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.

Download your Free Special Independent Review of the TFSA at:

Universal Life Accounts FAQ:

Question: How difficult is it to cancel a Universal Life Insurance policy?

Answer: All insurance contracts are what are known as unilateral contracts (A one way contract). As long as you keep paying into it the company has to abide by what is in the policy, however they can’t force you to keep it. There would likely be some paperwork that requires a signature to cancel it. Aside from the Surrender Charges there shouldn’t be any hidden fees, however all the ‘fees’ to cancel will be outlined in your policy that you have.

Question: Saving money and life insurance?
My husband and I are shopping for life insurance, and are considering Universal Life. The reason being: the cash value claims to be safe from creditors and collections. We do want to save money that earns interest, but can’t do it through a banks because of the many debts that we owe, collections can seize your bank account (they’ve done it to us before). Term life insurance seems like a waste because if the policy expires, we don’t get the money back, and if we have to renew, the premium will definately go up. Does anyone (please?) have any advice regarding these two MAJOR financial decisions?

Answer: I think you may need a term policy with a RETURN OF PREMIUM feature. It’s basically a term policy but it returns 100% of all paid premiums, (if you’re alive) back to you…after the tem is over. It’s not as expensive as UL or Whole. It gives you the same benefit as term…AND your money back, if you don’t die! (If you do die…your beneficiaries get the entire death benefit.) It will give you the protection you need for you and your family… and something to show for it. (And creditors can’t touch it!)

Question: What two adjustments are usually made to the cash value account in a universal life policy?
1. Cost of the term Insurance protection is charged and current interest earned is credited
2 current interest and insurance premiums are credited.
3 guaranteed interest is earned and premiums are credited
4 excess interest and premium are charged

Answer: The premiums are deposited into the policy’s value. Then, each month the cost of insurance and any expense fees/charges are deducted from the surrender value of the policy. At the same time, the value in the policy earns at a certain percentage rate. On fixed life products, they usually offer a guaranteed rate and a current interest rate.

Question: Does anyone have any information on State Farm’s Universal Life Insurance Policy and borrowing money on it?
I remember a long time ago when signing up for these policies they had mentioned something about them having a savings account or something to that affect that you could borrow money on. Did I miss understand them? If you can borrow money on these how do you go about doing this and what kind of penalties are there?

Answer: Give them a call. They may only allow up to 75% of the cash value to be withdrawn. Then again, they may allow the full amount to be withdrawn. If you choose all of it, you will cancel your insurance. If anything less, there is no tax consequence if the amount withdrawn is less than the total amount of premiums that has been paid up til this point. If, on the other hand, there is more in savings than has been paid in premiums, than anything over the amount paid in premium that is withdrawn IS taxable.

Question: Explain Universal vs Term life Insurance Quotes?
My wife and I just bought a Universal life insurance policy. We each have $100,000 in coverage. After talking to my parents, who are 59 and 58 years old and have term life, we think we are paying too much per month for premiums. Our agent showed us and told how the premiums we pay will partially go into a savings account and collect interest. This looked like a good thing and that is why we went with the Universal coverage. He also told us that the premiums for term would keep going up as we got older.

Answer: The short answer of the difference between universal life and term life is cash value. The advantage of cash value is that the universal life has the ability to grow a tax deferred and probably tax free return (I say “probably” because it is possible to not have the tax free return, but I doubt you would have any problems with that.)

With the cash value, you have the opportunity to keep your life insurance policy for your whole life. I don’t know the length of term for your parent’s policy, but their policy will increase in cost over the years and by about age 70 it will be so expensive they will not be able to keep the policies. Therefore, all the money they paid in term premiums they lose (effectively, they “rented” their insurance for 30 or 40 years instead of “buying” their insurance.)

What is the Best Tax Free Savings Account For Children?

Monday, October 26th, 2009

It is said that tomorrow’s doctors, lawyers, judges, and engineers are studying in the schools and colleges today. We have to provide our children quality education and a good childhood. This is important because our children will shape our future, and it is in our hands how we shape their future.

For many Canadian parents the rising cost of their children’s education is of concern. Planning for a child’s education is very important to protect your financial balance. According to Statistics Canada the average annual tuition for a Canadian university undergrad was $4,347 in 2006-07. The fee varies according to the choice of institution and the program enrolled.

For example the cost of college programs in Quebec is different from those offered in Vancouver or Ontario. Similarly cost of an undergrad arts program is significantly lower than an undergrad dentistry, medicine, or engineering program.

You should already have a roadmap for your child’s education but do you also have a financial plan to meet the cost of education? Do you think you can save enough to give your child a decent education? The following paragraphs will highlight how a tax free savings account can be a good option to meet your child’s expenses.

A tax free savings account can be a good savings solution for parents planning for their children’s education. Following are some salient points.

1. Starting in 2009 Canadians aged 18 and older can save up to $5,000 every year in a TFSA. Due to the age restriction children below the age 18 are not eligible to open a TFSA account.

2. Contributions to a TFSA are not tax deductible but investment income including capital gains earned in a TFSA are tax -free.

3. Withdrawals from the TFSA are not taxable and the account holder can withdraw funds at any time. Flexible contribution rules make deposits and withdrawals easy. People may choose to open accounts with spousal contributions to save for their children’s expenditures. The graph below shows how a couple can contribute $5000 or less to the TFSA each year. Please note that since the couple was not able to contribute 5000$ in year 4 the rollover balance of contribution of 1500$ can be contributed in the following years. Hence in the following year the couple contributes 6500$ in all.

4. The money from the account can be withdrawn for any purpose. Even if a couple primarily wanted to save for their child’s education, they still may use the money to meet other needs as well.

5. The 2007 Federal Budget had amended the RESP on the following lines which is very beneficial for Canadian parents. Firstly the $4,000 limit on annual RESP contributions was removed. Secondly the lifetime RESP contribution limit was increased to $50,000 from $42,000. Both these changes offered more flexibility within the account. A person can now save more with the RESP. Thirdly the RESP account can be held for 36 years. Fourthly the maximum annual amount of basic CESG was increased to $500 from $400. These changes are likely to benefit the higher income group but certainly provide more savings options to parents in general.

6. Please note that there are different investment vehicles for investors. The issue is to have the correct savings strategy. At times it is better to consolidate your savings and at times it is better to put your savings in different baskets. For example you must save in a TFSA as soon as you turn 18 and have a propensity to save decent amounts. At this level you are not in a higher tax bracket to use RRSPs. As soon as your income increases you must consider investing in a RRSP. Later you can convert it into a RIF to get pension funds credit. Finally as soon as you plan to raise a family you must think about saving in RESPs.

Remember that if you are already saving in the Registered Education Savings Plan (RESP) it remains the best place to save for a child’s education because any contribution attracts the Canada Education Savings Grants (CESG) resulting in an immediate boost of at least 20%. With the introduction of the TFSA it is best to contribute enough to the RESP to get the maximum allowed CESG of $7,200 per child (for a total RESP contribution of $36,000) and save more in a TFSA.

It is good to save for your children’s future. Every parent wants to give his child the best upbringing and schooling. He knows that good education can shape the future of his child. He also knows that shelling out a large sum of money in a single go is difficult. Many banks, financial institutions, and brokerage firms are offering different TSFA options. It is best to set your financial goals keeping in mind the money required for your child’s education and to consider all the options the various firms are offering.

Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.

Download your Free Special Independent Review of the TFSA at:

Tax Free Savings Account FAQ:

Question: Can I deposit $5000.00 each year in my TFSA?

Answer: An individual can invest up to $5,000 per year in a TFSA. The limit will be indexed based on inflation and rounded to nearest $500.

Amounts withdrawn from previous years can be added. For example, an individual who contributed $15,000 over the years and withdrew $12,000 could reinvest $12,000 in addition to the annual limit of $5,000.

It is also possible to defer indefinitely unused contributions.

Excess contributions are subject to a 1% tax per month and should be paid for each dollar exceeding the contribution limits. It is advised to never exceed the limits.

Question: What’s the point of a tax-free savings account?

Answer: As long as you had a regular savings account you were paying taxes on the interest earned in your savings account, now with TFSA you don’t have to pay the tax on the interest earned.

Question: What is the penalty on deposits over $5,000 in a TFSA?

Answer: 1% of the highest excess amount in the month, for each month you are in an over contribution position.

Question: How can we open a savings account for a grandchild without having to provide original birth cert as ID?
My husband has tried to open bank account for the first grandchild but they want so much ID which, living quite a distance from the family we have no access too, besides, we wanted it to be a surprise. There won’t be much money going in the account but over the years it will mount up. We wanted the child’s tax free savings account. Is there any way around this?

Answer: Nope, there is no way round it. The fraud prevention rules and regulations are so strict now. You will have to go by their rules and regulations.

Question: Are the Canadian TFSA’s insured like RRSP’s?

Answer: RRSP’s are not insured per se. If you invest in CD’s or have savings accounts in them those amounts would be. If on the other hand you hold mutual funds, stocks or bonds those amounts would not be insured. The same would hold true for TFSA’s

Question: Should I put my $5000 into my RRSP or the new Tax Free Savings Account?

Answer: It depends on your situation. If you put 5K in your RSP, you’ll get something back when you do your taxes. When you take out of your RSP, you’ll get taxed. If you put 5K in your TFSA, you don’t get anything back. When you take out of your TFSA, you don’t get taxed.

Tax Free Savings Account – Looking a Little Bit Closer

Monday, October 26th, 2009

Starting 2009, Canadians have access to the newest type of savings account, the Tax Free Savings Account, which give investors an opportunity to capitalize on tax free investment benefits. This new account is not widely understood, however, Canadians are excited to learn how it can benefit their financial futures.

One of the primary points to understand about the TFSA is that it is not merely a savings account as you may be familiar with from your local banking institution. A savings account creates an image for many of a low interest, liquid type of cash account. And while you can invest into cash within your TFSA, it presents virtually a limitless list of investment options to consider investing into, including securities, debt instruments and even real estate investments. An investor can invest in virtually whatever investments they wish inside of their TFSA accounts.

Most Canadians are familiar with the traditional RRSP investment account, commonly used for retirement purposes. Unlike the RRSP account, contributions made into the TFSA account are made on an after tax basis. Therefore, when the account owner withdrawals their funds, they are not subject to income taxes as they would if they had invested into an RRSP account. This tax free benefit is one of the largest draws for investors to consider utilizing the TFSA for their financial purposes.

Another key difference between the TFSA and traditional investment accounts is that funds can be withdrawn from the TFSA for virtually any financial purpose. For example, a TFSA owner could utilize those funds to purchase a home, a car, to send their children to college or as a retirement savings vehicle. This flexibility to withdrawal funds without a financial penalty creates flexibility that is attractive to most investors.

One last key difference between this new TFSA account and other retirement accounts is that money can be re-contributed into the account at a later date. For example, if an individual contributes their maximum allowable funds into the TFSA account each year and makes a withdrawal 5 years after they open the account, they can re-contribute the withdrawn amount into their TFSA so that they can take advantage of the tax free benefit again within their future. So, the ability to use this investment vehicle for shorter term financial goals as well as for long term financial goals is appealing to most investors.

While no investment vehicle is a perfect match for every investor, there are several key advantages to the TFSA that should be taken into consideration when creating both a long term and a short term financial strategy. Once the decision has been made to utilize the TFSA for financial goals, the specific investments must be selected for the account to hold. Personal risk tolerance, total investable assets, asset allocation, investment time frame and investment purpose should be taken into consideration when making these individual investment selections.

Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.

For more information visit:

Tax Free Savings Account FAQ:

Question: Tax Free Savings Account TFSA?
I’ve been reading a lot of articles and blogs about the the TFSA. Almost every article I’ve read implies using the TFSA for holding cash investments and GIC’s getting marginal at best returns. I would think the only real advantage in this account doesn’t come into affect until a large balance is attained, so wouldn’t it be advantageous to use it primarily as a vehicle to hold your moderate to high risk investments, maximizing your returns and tax savings?

I have yet to hear of anyone suggest this and I want to know if I’m off my rocker. Please tell me what you think?

Answer: Interest bearing investments that pay only interest and foreign dividends are taxed at 100% so it would advantageous to hold as much of these investments as possible in the TFSA. If you still have room then the Canadian dividends and capital gains could also be earned tax free but these investments already receive special reduced tax treatment.

Question: Interest on Tax-Free Savings Accounts- PC Financial?
I am probably not comprehending the interest calculation on my TFSA correctly. I opened my account in January at 2.55%. For the first month of the account, I deposited $500. When I go to check my interest accrued, it was listed at $0.75. Is there something I am missing? 500 x 0.0255 is $12.75. Even with averaging out the daily account balances, it seems as though I should have earned more interest than $0.75.

Is there something I am missing, or should I be on the phone with my bank?

Answer: That 2.55% is per annum- per YEAR. Not per month. So you’d have to divide the 2.55% by 12 first, to get .21%. Now multiply that by 500 to get 1.05. The difference between that and the .75 has to do with how often the interest is compounded.

Question: Would appreciate feedback about tax-free savings account (TFSA)?
I am considering options for savings and have learned more about the TFSA but would like to hear directly from those who have opened this type of account. How are you finding it? What do you like about it, and dislike, if anything?

Answer: To me it’s like any other savings account, you throw some money in there and wait a couple years. Nothing really to like or dislike really, depending on the ones you go with as they differ from place to place.

Question: It is worth it to split my money into two savings accounts?
Okay so the direct savings account and the tax free savings account both have the same interest rate but the limit on the tax free savings accounts is $5000 per year. which means I’m going to have to split my savings into two accounts. Should I just put the whole things into a direct savings account instead of splitting it into two accounts?

Answer: No, do two accounts so you can take advantage of the tax break. That makes the most sense to me.

Question: Differences between Tax-Free Savings Account and RRSP?

Answer: RRSP provides an immediate tax savings, since all amounts (below your limit) are deducted from income. All amounts (original principal plus any accumulated earnings) are taxable once you withdraw from the RRSP. Earnings accumulate tax free in the interim. The advantage is the immediate tax savings, plus the ability of the earnings to compound over the years.

In the Tax free savings account, you use after tax dollars to contribute. Again, earnings accumulate tax free, but all earnings are taxable once withdrawn. Here the only advantage is the ability of the earnings to compound over the years.

Question: Is the TFSA really tax free?
Don’t you get taxed upfront? I already filed my taxes and there was no mention of tfsa. The interest you earn on a tfsa is tax exempt but that is a pretty small amount. What is with the tax free slogan all the institutions are singing?

Also, what is the “transfer out fee”? And why would I do it? I can just withdraw the money and put it in a different account.

Answer: Do not confuse the TFSA with the RRSP. TFSA has nothing to do with your personal income tax because it involves after tax dollars. When you contribute money to a TFSA, you are subject to a limit of $5k per year.

The big different between a TFSA and a regular account is the tax exempt status of it. As you say, the money you earn is tax exempt and you don’t have to report on your income tax. If you earned $50 in a regular savings account, the bank would issue you a T5 slip and you would report that interest as income when you do your taxes. Had that $50 been earned from a TFSA, the bank won’t issue you a slip because you don’t have to report it.

The transfer out fee is the bank’s way of getting some money out of you for ditching them. Say you don’t like the bank, or want to take your account to another place, this is the fee they are charging you to transfer it from one place to another. Each place can make up their own fee and claim it is a cost of doing business.

Question: Canadian Tax on interest ?
I recently found out that Canadians are required to pay tax on the interest they accumulate in their savings accounts. Can anyone confirm this?

I only came across this after viewing a CIBC commercial that offered “a tax-free account” and I asked myself “why would I need a tax free account??” I do my tax online through Quicktax and I don’t ever recall any request to enter the amount I made on interest. How would I know how much I made on interest? Am I expected to go through all my banking statements and add up the interest?

Answer: If you made above a certain amount, the bank will send you a form at the end of the year that shows your interest income. And yes, tax on interest is virtually certain, worldwide.

Question: Credit card debt or TFSA?
The govt and banks are pushing these new Tax Free Savings accounts. Should you start to put money in one if you’re still carrying a balance on your credit card?

Answer: Normally I tell my clients to have a good balance between debts and savings. After all, you should always pay yourself first by investing your money.

However, when you carry a credit card debt, which is bad debt, you should concentrate on getting rid of the balance.

It is simple math really. Credit card interest rates can be upward of 30% where even in an Aggressive Mutual Fund under the TFSA you will get maybe 12 – 15% at most. So, it makes more sense to pay off your credit card.

If the debt in question was a mortgage or a line of credit where the interest rate was 4-5%, I would suggest the opposite.

Tax Free Savings Accounts and Canadian Emigrants Who Leave Canada

Monday, October 26th, 2009

There is a large population of Canadian citizens who leave Canada to live abroad for a variety of purposes. When an individual leaves the country, they often have a variety of financial questions with regards to their investment accounts within Canada and how they are treated while they are living abroad. Now that there is a new account available to Canadian investors in 2009, the TFSA, new questions are forming within this group of emigrants about how they can take advantage of this account while living abroad.

Can an Emigrant Contribute to their TFSA account while Living Abroad?

A non-resident Canadian citizen who is living abroad can still take advantage of the TFSA account. Emigrants who have left Canada are eligible to maintain their TFSA accounts and the earnings that they make on their investments. In addition, contributions can still be made into the account while the individual is living abroad, but the contributions will be subject to a 1% tax until the amount is withdrawn and designated as a non-resident contribution.

One key point that non-resident Canadians should understand as well is that the annual room within the TFSA accounts for annual contribution will not continue to accrue while they are living abroad. So, these individuals are only allotted contribution allowances into the TFSA account while they are considered residents of Canada.

How are TFSA withdrawals managed for non-resident emigrants living abroad?

A Canadian citizen who is living abroad can make withdrawals from their TFSA accounts while receiving the tax benefits within Canada. But, the individual should review the tax regulations within the country that they are currently a resident within to determine how the laws will affect money withdrawn from the TFSA that is brought into the country.

When a non-resident Canadian makes withdrawals from their TFSA, the room created will remain eligible to the account holder for re-contribution of funds at a later date, giving the investor long term tax free advantages for their investment dollars. However, this room can only be re-utilized when the emigrant becomes a Canadian resident again and cannot be capitalized on while the individual is still living abroad.

Overall, Canadian citizens who emigrate from Canada still receive a variety of the tax benefits that the TFSA offers to Canadians. The account still offers tax free withdrawals and can be used for both long term and short term financial goals. One of the key points to remember is to leverage the maximum contribution allowances during the time periods that the individual is considered to be a resident of Canada, as this money can remain in the account and grow on a tax free basis over the long term. Therefore, it is important to take advantage of compounding growth whenever possible while living overseas by making allowable contributions into the TFSA.

Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.

Download your Free Special Independent Review of the TFSA at:

Tax Free Savings Accounts FAQ:

Question: Can I open Tax-Free Savings Account in two different Banks in Canada and transfer money totaling to CA$ 5,000?

Answer: You can open them in as many banks as you want, but you are limited to a max of $5000 total per all the banks, not $5000 at each bank. You can double the amount if you put equal amounts in your spouses name.

Question: What’s the point of a tax-free savings account?
I’ve had many PC Financial accounts for well over 10 years now, have not paid a penny for anything, but now am offered a tax-free savings account? When was I paying tax on it before? What exactly is the point of this account?

Answer: You seem to be thinking of fees, not taxes.

The savings interest in a tax-free savings account is, well, tax-free, as in you do not pay Income Tax on it.

Also, you can hold mutual funds and stocks in a tax-free savings, and the interest, dividends, and capital gains derived will also be tax-free.

Question: Does the new Tax-free savings account lower your taxable income?
Or does it just protect you from paying tax on interest?

Answer: That tax free savings account has nothing to do with your taxable income when you make a deposit (contributions are not tax-deductible). All earnings on the account are tax sheltered and take free upon withdrawal. Be careful where you set it up though…not everyone offers the same types of investments that can maximize your tax savings.

Question: Please help me understand Tax Free Savings Accounts (TFSA).
If I’m understanding right, you can contribute $5000 a year? And then the portion you do not use rolls over to the next year? So is it better to use RRSPs where you get the deduction on income tax or better to save money to use TAX FREE at any time?

Answer: If you are saving for long term, you are better to use the RRSP. With an RRSP, your contribution is a tax deduction, which means it is automatically worth 15-45% more than an after tax contribution to a TFSA.

Yes, you will pay tax on any withdrawals, but over a long period, the growth of that 15-45% increase will more than wipe out that disadvantage.

On the other hand, if you think you’ll want the money out in the shorter term, a TFSA might make sense, provided it is invested in something fairly high earning. Bank interest makes a TFSA almost worthless, in my opinion, and if you want that level of comfort, you’d be MUCH better off with an RRSP, since the tax deduction at start makes way more difference than the piddly little bit of interest you’ll get.

Question: Are Tax Free Savings accounts insured?
Are the new Canadian TFSA’s insured like RRSP’s?

Answer: Yes and No. It depends on what type of investment you hold under the TFSA. Essentially, the TFSA is a non registered investment so it would not be insured. However, if you were to hold a segregated mutual fund under the TFSA you would receive creditor protection because it is an insurance based product. Some segregated funds offer 100% protection of the face value, while others only offer 75% protection. Just make sure you choose the right one for you.

Question: I just opened a tax free savings account?
The banker advised me to. He said the interests are high and tax-free. He said I can also use the money in that account to deduct it against my taxable income. Does anyone know what he is talking about?

Answer: No, you cannot use the amount placed in the TFSA as a deduction. However, any interest earned on the account will not be taxable, which will allow it to grow at a faster rate than ‘normal’ savings.

Interest will NOT be high, I can guarantee that. While those with debt are enjoying the historically low interest rates right now, those with savings are suffering from those same historically low rates. If you’ve got the TFSA invested in a simple interest bearing account, your interest earned this year will be minimal at best. There are other options for your account, such as mutual funds, but those also carry a risk.

Question: How old do you have to be to open a tax-free savings account?

Answer: All Canadian residents over the age of 18 and in possession of a social insurance number. Residents of British Columbia, Newfoundland and Labrador, Nova Scotia or New Brunswick have to be 19 years old. Allowable contribution space will start from the time you turn 18.
So if you are 18 you can register an account. You may have to wait until you are 19 to contribute, if the province you live in is one of the above.

Question: What are the penalties on deposits over $5,000 in the new Tax Free Savings Account?

Answer: Financial institutions will send an electronic file to the government at the end of each year on how much you withdrew and deposited and Revenue Canada will keep track of your contribution room. Your “Notice of Assessment” that you get from Revenue Canada each year will show these amounts.

If you over contribute in one year, CRA will charge you a tax penalty of 1% per month on the amount you over contributed. The financial institutions are not responsible for controlling your deposits as you could have several TFSAs over several institutions. So keep good records!

How to Transfer Money to Canada

Monday, October 26th, 2009

Every year, almost 40% of Canadian residents send money to other countries all over the globe. A sizable portion of this money goes to family members in Haiti and the Philippines. But did you know that there are also plenty of people who reside in other countries who transfer money to Canada, as well?

It’s not something you hear about much. To be honest, a great many people assume that since Canada is a fairly wealthy, developed nation, its residents have little need of remittance.

Did you know that you can send money to Canada without the recipient having a bank account, and without paying the high fees associated with wire services and other “kiosk”-based money services?

Sending money via offline wire services can cost close to ten percent of the money sent if you want to transfer money to Canada that same day–and it won’t cost much less if you opt to have it arrive the next day.

This is more important than it used to be, with the exchange rate being what it is. Certainly many Canadians are proud that their dollar’s value now runs neck-and-neck (and they no longer have to bear snide, “Canada, where everything’s 30% off!” jokes from U.S. tourists).

But this also means that if a friend or relative chooses to transfer money to Canada, it’s just not going to be worth as much as it used to. This heightens the impact of the high percentage fees charged by non-bank wire services.

Money orders cost less and are preferred by many people when time is not so much of an issue. However, there is always the question of whether the money will make it safely there. Postal and parcel services are certainly more reliable in North America than in most places around the globe, but the urban legend of the letter than never reaches its destination, exists for a reason.

There are also ways to send the money online as well. And if you want to transfer a large amount of money to Canada to someone who rarely receives large amounts via online transfer, the company may temporarily freeze the account to check for fraud.

Wire transfers from banks that offer them usually cost $35-$45. Although some may balk at the fee, this can be cheaper than wire transfer services if the amount is several hundred (or more).

Pre-loaded debit cards that can be charged via phone or internet connection are becoming more popular. There is at least one service that will deliver the card via the ever-dependable FedEx service. The recipient need only visit one of Canada’s many ATMs to withdraw their cash.

There are many different ways to transfer money to Canada, and not every one of them will meet the needs of every situation. With knowledge of the benefits and disadvantages of each method, you can pick the solution that most closely fits your needs.

For more information visit sending money to Canada or visit the home page for information on sending money almost anywhere in the world.

Money Transfer to Canada FAQ:

Question: Best & cheapest way to transfer money from UK to Canada?
I need to transfer 700 Canadian dollars from my Lloyds TSB account to my landlord in Montreal, Canada. Is it best to do a wire transfer, Western Union money order, paypal, or another method? I want to pay as little fees as I can.

Answer: Can you not just use an email cheque to your landlord? Or email the money in the UK to yourself and deposit it into your Canadian bank account if you have one?

From speaking to people from the UK it appears your bank fees are much higher for services than they are in Canada.

Check with your bank in Canada and they can tell you, you should transfer some funds to Canada anyhow.

Question: How long does it take to process money sent through bank transfer from Canada to Japan?

Answer: Usually takes up to 5 to 7 business days, but for your safety go check with your bank.

Question: Fastest/Cheapest way to transfer money from China to Canada?
I’m going to be going to China for 3 years and I want to be able to send money home to my family. Is Western Union going to be the best bet or is there an alternative method from China?

Answer: Open a bank account and a paypal account. You can pull funds from your bank account and put into paypal account. Have your family open a paypal account and you can “send payments” to them. I don’t know if paypal just lets transfers go through but you can always act like you are paying them for auction purchases or some type of goods. But, you do have to deal with the currency exchange so they might charge for that… not sure.

Western Union is way expensive. If it’s not money they need right away and you are just sending it… just write a check and mail it to them on a regular basis.

Question: How do I transfer money from my account in Canada?
I am in Canada and have an account with Royal Bank and need to transfer some cash to a UK bank account. How do I do it?

Answer: To get the best exchange rate (you will obviously be exchanging currency as the exchange is from CND to GBP) you should use a foreign exchange specialist.

You will also pay no fees, no commission and they can handle the transfer process. Traditional banks charge all manner of fees, and the exchange rate is poor.

Question: Tax Consequences of Transfering Money into Canada?
I plan to transfer $5000 from the US into Canada and have my money converted into Canadian Dollars. Will the US federal government tax me for my transfer? Will Canada tax me for my money transfer?

Answer: No. Merely transferring funds to another account has no tax consequences. If any interest is earned then that will be taxable in both the US and Canada in most cases. If you are a US citizen or resident you will get a credit on your US tax return for any Canadian income taxes paid on the interest.

Question: I don’t have a US account. I want to transfer money from Canada to US. what would be the fastest/cheapest way?
I am going there on a job visa. I can’t open an account online (no SSN yet). I would open an account once I get there and would need the money almost instantaneously, talking of about 10K.

Answer: Citizens Bank International will allow you to open an account without a social. I don’t know if you can get access to one.

Question: Transferring money from Canada to the US or vice versa?
Got a Canadian friend and we need to do some business, only about $100 worth. What’s the best way for me to send $100 to him in Canada, or for Him to send me $100 here in the US? Would like to avoid any pesky fees. Is it possible?

Answer: Mail a money order in the currency of that location. If it’s going to Canada, mail Canadian funds, it it’s going to USA mail it in US funds. Mail is your best bet, as banks are going to charge you anywhere from $25-$50 to wire the funds.

Question: Does anybody know how to send concealed cash to Canada? (not money transfer).
Does anybody know how I would send cash in an envelope to Canada? We’ll just say for example like 20 or 30 dollars or something. How many stamps will I need? Do they even allow you to do that?

Answer: You should never send cash. You should purchase a money-order and send it. Take your letter in to the post office and they will tell you the correct postage based on weight and the address you are sending it to.