30 - Wednesday, February 1, 1989 - North Shore News IT’S QUESTION-and-answer payoff time again, when the answer to one reader’s question could well pay off for many readers. “What's the best way to save for children’s — or grandchil- dren’s — education?’’ asks P.A. “Scholarship plan? RESP? Family allowance in child’s account? Parent’s RRSP? “We don’t really want to lose control of the money by putting it in the child’s name. If they don’t go to university, we're going to Europe!’’ I like depositing the family allowance cheques in the child's account (then term deposits, sav- ings bonds, perhaps mutual funds) — usually in your name in trust for the child. All income and growth goes to the child for tax purposes. Technically you shouldn't use this money for your European trip if you decide the child doesn’t deserve it. But you could always use the family allowance funds for the child’s expenses and save your own money for the trip. The other options all have ad- vantages and disadvantages. You win the gamble with schol- arship plat:s only if the child does go on to higher education. The tegistered education savings plan ig Financial Statements *Bookkeeping ©Payroil 0 income Tax °Personal & Corporate Income Tax Financia! & Tax Planning tax shelters growth and the student eventually declares this growth — dollars and sense Michael Grenby es but again, there must be a student. The registered retirement savings plan would only work if the parent’s income dropped sharply the year(s) the money came out. O Busin ness onsulting *Incorporation *Office Automation (1 Computer Software *Microcomputer Software (Accpac, dBase, Lotus 1-2-3, etc.) TWO, LOCATIONS TO SERVE YOU BURNABY 105-5481 Kingsway 430-4134 NORTH SHORE 231-1433 Lonsdale 988-8815 The Sky is NOT the Limit. With The Prudential, there are no limits. Introducing a unique opportunity for men and women who want success without limit: the opportunity to develop your own business franchise. Join The Prudential’s Canadian marketing team and receive full financial support, comprehensive training, and the backing of the world’s largest non-bank financial institution. We'll even provide you with an exclusive territory, an existing client base, office support and The Prudential's proven line of successful financial products. In return, we ask for no capital investment, no franchise fee, and no experience. All you provide is integrity, a willingness to grow, and the ability to reach for unlimited earings. If joining the leader interests you, and limits don’t, call the nearest Prudential office to arrange for an interview. ‘We are expanding in the following areas: in the Lower Mainland and Interior call 294-1144 In Vancouver Island call 385-2111 The Prudential (ake Insurance & Financial Services Business _ ie What is the best way to save for education? A long-term investment program for capital gains (tax-free within limits) in the parent’s name pro- vides the most flexibility. But this can also produce losses if the mutual funds or stocks don’t per- form well. “We transferred our mortgage from a credit union to a bank and had to pay $270 in service charges to the credit union,’’ said J.B. “We complained, especially when we found other places charged far less. Please warn yoar readers.”’ The time to learn about such costs is before you get the mor- tgage. Ask about setup, transfer, payout — and any other — fees. You should shop around whenever you take out or renew a mortgage. Try to bargain for elimination or at least reduction of these fees, and ask for confirma- tion in writing of the deal you make. “1 am a widow aad wonder what the tax rates are when it comes to investing for interest, dividends or capital gains,’ writes C.H. Dunwoody & Company, chartered accountants, shows that if you are in the lowest tax bracket (taxable income this year — 1989 — of up to $27,803), you pay 17 per cent federal tax on interest, CANADA'S LARGEST CHAIN OF PAINT AND WALLPAPER STORES. DIBECT FF 1989 4.58 per cent on dividends and 11.33 per cent once you have used your capital gains exemption. (For the total tax, simply increase the amount by the provincial tax.) In the middle tax bracket (tax- able income $27,804-§55,605), you pay 26 per cent federal tax on in- terest, 15.83 per cent on dividends and 17.33 per cent on capital gains. In the top bracket (over $55,605), you pay 29 per cent fed- eral tax on interest, 19.58 per cent on dividends and 19.33 per cent on capital gains. How investment income is taxed certainly makes a difference. But you must also calculate the risks and other costs of the invest- ment(s) you choose. “What should I invest in my RRSP?” asks P.L. Let’s say you have $80,000 — your total savings — all in your RRSP. If you are young, you might consider some balanced mutual funds for long-term growth plus interest-producing deposits (stripped bonds, GICs, mortgages) as a hedge in case the market doesn’t perform so well. If you are older, you might have a greater percentage in the guaranteed de- posits and less in the equities. If you have $40,000 in your RRSP and $40,000 in non-RRSP investments, use the same guidelines as before. But try to hold the interest-bearing invest- ments in the RRSP to shelter the interest. And hold the equities out- side the RRSP, where you benefit from the favorable tax treatment of dividends and the capital gains exemption. “I want to change my career direction and am interested in fi- nancial planning,” writes D.N. “Can you make money at it? Where do I get more informa- tion?”’ If you charge a fee for your ser- vices, your income is determined by the number of hours for which you can bill. If you sell, your sales skills make the dollar difference. Contact the Canadian ‘Associa- tion of Financial Planners, 120 Eglinton Avenue East, Suite 1111, Toronto, Ontario M4P 1E2 and the Canadian Institute of Financial Pianning, 70 Bond Street, Suite 405, Toronto, Ontario M5B iX2. The CAFP can provide details about being a financial planner, including its requirements for becoming a member and a Regis- tered Financial Planner. 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