Financial Literacy Month Q&A Session

It’s financial literacy month! We’ll be taking questions and answering them each week during November. If you have any questions, email them to us at robmce@csolve.net orscottmce@csolve.net

1. Should I be putting my extra money into a TFSA or RRSP?

This is a classic case of “it depends on your situation”. Both options have great advantages, depending on A) how long you plan to not need the money B) what your current tax bracket is and c) your ultimate purpose for the plan. This question is best answered when we sit down with you to figure out the specifics of your situation.

2. Should we put insurance on our kids?

Generally we recommend life insurance to A) cover the loss of your ability to earn an income and B) to cover final expenses. Since children don’t earn an income, we think having insurance on the parents is much more important. Having a life insurance policy on children does have some advantages though. For example, a child has a bleeding disorder and cannot get regular rates for insurance, but since his parents put a policy on the child when he was young, before diagnosis, those policy premiums are not affected by the bleeding disorder. In addition, because this is personal insurance, there will never be a problem with a death claim and the current death benefit increases yearly, even though the premium paying period is over.

3. There’s insurance for this, and insurance for that! How much and what types do I really need and how long do I need it for?

If you have dependents (ie. Children) then you should have life insurance. How much do you need? You’ll want enough to cover your debts, final expenses, and your family’s current spending habits. Term insurance is great if you have a specific need over a specific time period. One thing we have to keep in mind is that life throws us curves our way and typically when a mortgage should have been paid off, it rarely is. One situation you do not want to encounter, for example, is having your mortgage insurance run out when you still owe dollars on our mortgage or having your bank refuse to renew your mortgage insurance due to a recent health problem. With the plans we recommend, this will absolutely not happen.

Stay tuned for next week when we answer 3 more questions. Not clear on these answers? Email us and we can clarify further.