Personal finance can be complex. Not only can the concepts and rules be challenging, everyone’s situation is also unique: One logical money decision for one individual could be an inappropriate move for another person. And there can be a lot riding on your decisions: your retirement, your children’s education and your lifestyle may be at stake.
At each stage of life not only do your life goals shift but so too does your financial focus. At age 25, budgeting may be your most important concern. At age 50, your tax strategy may dominate your thinking. Fortunately, a greater knowledge of finances can allow people to make more informed choices.
So, before you make your next money move, here’s a chance to test your financial know-how. We hope this may be an opportunity to learn and motivate you to apply your knowledge to your financial scenarios with fresh eyes.
1) What percentage of your annual income can be contributed to your Registered Retirement Savings Plan (RRSP)?
A. There is no limit
B. 18% of your income, with some exceptions(1)
C. 10% of your net worth
Investing in mutual funds and other investments within an RRSP can be a great method to benefit you and your family now and in the future. RRSP contributions can lower your taxable income and may even help contribute to a tax refund annually. With annual contributions over time, investments within an RRSP can provide a method of compounding savings to fund your retirement years. You can continue to contribute to an RRSP until the end of the calendar year when you reach the age of 71.
2) The principal residence exemption is….?
A. A tax exemption for seniors who sell their home
B. A deduction for those helping their children with their first home
C. A tax credit for home renovations
D. A tax exemption from capital gains on a primary residence
When you sell property, any capital gains are taxable. This could be a major burden for those selling real estate because the gains on real estate could be large (especially given the current housing market). Fortunately, the principal residence exemption grants an exception for your primary residence or family home (under certain conditions). If you have more than one property, it’s best to consult a financial advisor on how you can manage the principal residence exemption or other tax strategies.
3) How old does a child have to be to have a Registered Education Savings Plan (RESP) set up for them?
A. One year old
B. One year old but younger if their sibling …….