September 2012
That most wonderful time of the year....




While the warm temperatures may fool some of us, all those in school will attest that it is indeed September.  At this time of the year, we are reminded of the adage 'You are never too old to learn something.'


This month's newsletter focuses on helping parents and students with the cost (both physical and mental) of easing in to a back-to-school routine. For those families without school-age children, we have included a great TFSA article and encourage those without a Tax Free Savings Account to inquire about this savings vehicle.


Give us a call; we are here to discuss this, and many other things.


Be well.



Peter, Richard, Claudio and Joanna

Taxes for teenagers: Nine ways for students and parents to cash in

by Tim Cestnick, Globe and Mail - September 2012


My son experienced his first day as a high school student this week. I'm not sure I'm going to like this experience. He's already talking about the tattoos so many kids at school are getting these days. I had a dream that he wanted to have his teeth sharpened, tongue forked, bumps implanted on his forehead and scales tattooed on his face. Don't cringe - it's been done before.


Why can't kids take an interest in normal things like tax planning? Forget the tattoos. Let's sit around the kitchen table on Friday nights and talk about tax ideas. My parents didn't do this for me. You can imagine the disadvantages and scars I faced as a result. Here's a list of tax strategies to chat about at the dinner table with the students in your life:


1. File a tax return

As a general rule there's no requirement to file a tax return if your child doesn't have any tax to pay. Not smart. If your child earned any income at all he should file a tax return because he'll create registered retirement savings plan contribution room this way. Later, when he's earning an income, he can make deductible contributions to his RRSP to save tax. Further, filing a tax return could entitle your child to a GST or HST credit worth about $260 in cash once he's 19 years of age.


2. Claim moving expenses

Your child can claim moving expenses if the move to school, or home again, is at least 40 kilometres. She'll have to earn income in the new location to claim the expenses, which can include taxable research grants or other awards. Of course, working part-time at school or in the summer can also create the income needed to deduct moving expenses.


3. Claim tuition and education credits

Your child can claim a tax credit for tuition and an education amount based on $400 a month of full-time ($120 for part-time) attendance in school. If he doesn't need the credits to reduce his taxes to nil, he can transfer up to $5,000 of these costs to a parent, grandparent or supporting spouse, or carry them forward for use in a later year. Be aware that claiming tuition and education amounts for certain online foreign educational institutions has been problematic recently. You might still qualify for credits, but speak to a tax pro first.


4. Claim textbook and ancillary costs

A credit for books, student fees, parking and equipment can be claimed. The credit is based on $65 a month for full-time ($20 a month for part-time) attendance in post-secondary school.


5. Claim student loan interest

If your child borrows money by way of qualifying student loans make sure she claims a tax credit for the interest. The loan must be made under the Canada Student Loans Act or similar provincial legislation to qualify, and an official Canada Revenue Agency or provincial slip should be issued to support the claim.


6. Claim public transit costs

A tax credit is available for the costs of public transit to get to and from school. The cost of monthly (or longer) transit passes for travel within Canada can be claimed. These passes must permit unlimited travel on local buses, streetcars, subways, commuter trains or buses, and local ferries. Passes of shorter duration can be claimed if certain conditions are met.


7. Claim child care costs

A student (or his spouse) may be entitled to claim a deduction for child care costs where at least one spouse attends school full- or part-time.


8. Don't consolidate student debt

It's a popular strategy to take several different debts and roll them into one single loan payment at a more attractive interest rate. This type of debt consolidation can make sense - but not for student debt that will otherwise qualify for the student loan interest credit. You'll lose that credit if you consolidate.


9. Consider the Lifelong Learning Plan (LLP)

If you are an RRSP owner, and a resident of Canada, you can generally participate in the LLP to withdraw funds from your RRSPs on a tax-free basis for full-time education for you, or your spouse or common-law partner (but not your children). You can withdraw up to $10,000 a year for up to four years, but to a maximum of $20,000 in total. After you've withdrawn $20,000, you have the option of repaying your RRSP and then making further withdrawals. Failure to repay the amounts in accordance with CRA's schedule can mean paying tax on the withdrawals.

Tax Free Savings Account: 10 things you need to know

By Susan Down, - August 2012


Every so often, the government gives you a tax break. It doesn't happen very often, so it's all the more reason to take advantage of it when it comes your way.

In 2009, Ottawa introduced the Tax Free Savings Account (TFSA) and while there has been some recent confusion about the rules, these savings accounts are a good way to sock away cash.

Here are 10 things you need to know about the tax free savings account.


1. How do they work?

The TFSA was launched in January, 2009 and can be defined by what it is not.

Unlike an Registered Retirement Savings Plan (RRSP) the contributions are not tax-deductible. So you deposit after-tax cash into it, but you can withdraw it tax free. Putting money in RRSP savings accounts gives a tax deduction when you deposit it, but you later pay tax on what you take out. So a tax free savings account as the name suggests, a tax free savings haven rather than a tax-deferred shelter like an RRSP.

2. Forever tax free 
You never pay tax on the money inside your tax free savings account, so you can invest in interest bearing options like bond funds and GICs, or aim for growth in the form of investments like common stocks. You can't deduct the interest if you borrow money to invest in your tax free savings account, but the other benefits are attractive. When you take it out, it's still tax free and it won't affect your eligibility for income support programs based on earning levels.

3. What can go inside 
Generally the investments allowed in a tax free savings account are similar to those of the other plans and include everything from GICs to mortgages . In addition to making cash deposits to buy investments, you can make in-kind contributions by transferring shares and mutual funds you already own into a TFSA. The rule is that the investment must be arm's length from you (for example, personal debt is not allowed) You must set one up through a financial institution, but you can make it a self-directed account and manage it on your own.

4. Beware of over contributing 
You are allowed to contribute $5,000 a year and carry forward the unused portion to the next year. But be careful. Many Canadians have been confused by the rules and face penalties as a result. They withdrew money from their tax free savings account in say January and then put the amount back in June. They were shocked to discover that the redeposit was considered a double payment and subject to a hefty tax penalty. 

5. Save and save some more 
If you need spending money, go ahead and dip in. The chunk you take out gives you equal contribution room the next year. So if you remove $3,000 for a vacation, you can contribute that same amount (in addition to $5,000 maximum) the following year for tax free savings. Just be careful not to reinvest during the same calendar year. See above. 

6. Contributions carried forward 
You can take advantage of your unused portions of the $5,000 annual limit at any time in your life. You may be one of those people who starts saving early (you have to be over 18 years old), even when you don't have an income that allows you to save the maximum annual amount. With a tax free savings account you can be rewarded for procrastinating by catching up on the contributions later on. There is no upper age limit for TFSA contributions, unlike RRSPs that require you to stop adding to the fund at age 71. 

7. Give a TSFA as a gift 
Go ahead and surprise him or her with the gift of a TFSA contribution. While this doesn't get you any tax benefits in return, neither does it affect your own contribution maximum. And hey, it lasts longer than flowers. Also, your spouse can be the beneficiary of your plan after your death. 

8. Compounding power 
Investment advisors love the charts that show you how by putting away a few dollars a month for a lifetime, you could be rolling in dough, unlike your colleagues who spent it on lattes. So starting early with tax free savings and being disciplined has its advantages. 

9. Canadian residents only 
Non-residents of Canada aren't eligible to open a TFSA. If you happen to leave the country after you have started a tax free savings account, you can maintain your existing TFSA, but you can't add anything to it as long as you're a non-resident. 

10. Low risk strategy 
Since you can't claim capital losses in your TFSA on investments that have gone sour, it is best to opt for blue chip equities with high-yield dividends to fill up your TFSA. Also, because the maximum annual contribution isn't high enough to spread your market exposure around, it makes sense to choose investments such as exchange-traded funds that represent a broad sample of companies found in a stock market index.

How to deal with your child's back-to-school anxiety

By Tralee Pierce, Globe and Mail - August 2012


When Jill Amery's son Ford started kindergarten last year, he spent weeks in tears. After the Vancouver mother tried every parenting trick in the book to help fix the situation, Hudson himself finally blurted out the truth.


"One day, he clung to me and said, 'I don't want to get lost!'" says Ms. Amery, the founder of the website Thinking on her feet, she found a company that made cool Velcro wristbands that conceal a slip of identification information and added ID tags to his backpack.


"It turned things around within a day. It gave him the confidence he needed," says Ms. Amery, who hopes to use her new-found wisdom as her second son, Hudson, enters kindergarten next week.


There's a reason why, even as adults, many of our worst nightmares continue to be set in airless classrooms or feature us naked and unprepared for exams: School is where a wide range of fears meet, mingle and multiply.


No matter what age, all kids can use a gentle check-in from their parents about any anxieties they may be feeling.


So as Sandra Mendlowitz, a psychologist in the anxiety program at Toronto's Hospital for Sick Children, says, "You want the child starting the year off in a confident manner."



The hallmark of anxiety is avoidance of the thing that is scaring us; for kids, that means they simply won't want to go to school. The most common way this manifest itself physically is a stomach ache, Dr. Mendlowitz sas. It's not fake, either; it's a real physiological response. "It starts the night before or the morning of as the stressor approaches. And if the child doesn't go to school, the stomach ache goes away."


Little ones

To ease your kids' fears, experts suggest mapping out the routine, even walking the route to school a few times. Some teachers will have had open doors this week, but even if you missed that chance, visiting the school grounds can still be soothing.


If you've been the primary caregiver or seem to be more attached with your four-year-old , it may be clear that she is going to melt down as you try to peel her off you; send your spouse or an older sibling to walk to school with the child, Vancouver parenting speaker and author Kathy Lynn suggests.


And Dr. Mendlowitz says kids are never too young to learn simple deep-breathing techniques to calm themselves down.


Older kids

You thought you were in the clear once your kids made it out of kindergarten alive? Transitions to a new school - especially giant high schools for Grade 9 - can be tough for other reasons, including fears around failure, bullying and hazing.


The anxiety of being at the bottom of the food chain can be paralyzing, Dr. Mendlowitz sas. It's not uncommon to speak to teens who have not visited their lockers for six months because they have forgotten the combination, she says. "They say, 'I don't know who to ask.' They're afraid to look stupid."


They are also in perhaps the toughest stage of human development, don't forget. It's an adolescent's job to reject his parents. But he, too, may beg to stay home one day, paralyzed by anxiety. You can help them best by not pointing out this disconnect.


"Listening is the most important skill for these older kids. You may think you know exactly what is bothering them, but you might be way off base," Ms. Lynn says.


And once the lines of communication are open, resist the urge to share your own anxieties about high school. "This is not the time to talk about drugs, sex or online porn," Ms. Lynn says.


Rule No. 1

Don't let them skip school. "Parents have to be firm," Dr. Mendlowitz says. Consider going to school the best way to conquer the fears. "Every day you do it, it becomes easier." Routine is critical for children of all ages. In this case, experts say, the goal is to make what was once scary totally boring and banal.


Then customize your approach

You know your children and what can work for them, Ms. Amery says. For her kids, books and role-playing are big - when the boys faced some recurring fears around monsters, she dug out books that used humour to dispel the fears, such as Go Away Big Green Monster. Art therapy was less successful. "If I get out paper and ask them to 'draw their anger' they look at me like I'm daft."


What about you?

Don't forget that your face is the ultimate mirror, Ms. Lynn says. Listen to your child's concerns, of course, but "don't be all weepy and sad yourself. Be pleased and excited for your child."


Others suggest telling your own stories about school jitters - complete, of course, with a happy ending.


When to seek help

How can you figure out whether your child's anxiety is within the normal range or if you should see a professional? Dr. Mendlowitz says it's handy to know the definition of a disorder as a constellation of symptoms that interfere with a child's ability to function.


The most common type of anxiety disorder is generalized anxiety disorder, in which children are often described as "worrywarts."


One lesser-known disorder, separation anxiety disorder, can affect teenagers who can't shed the fierce reluctance to leave a parent that is common among toddlers. It's the only anxiety disorder exclusive to childhood and the prevalence rate is about 4 per cent for school-aged children and 1.3 per cent of teens, Dr. Mendlowitz says.


Ten per cent of North American kids experience some form of clinical anxiety. "That's a large group," Dr. Mendlowitz says. "Larger than any other medical problem, but it's often overlooked."

Issue: 21
Financial Markets
In This Issue
Taxes for teenagers: Nine ways for students and parents to save
Tax Free Savings Account: 10 things you need to know
How to deal with your child's back-to-school anxiety
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Peter Bailey
Worldsource Financial Management
272 Lawrence Avenue West, Suite 203
Toronto, Ontario M5M 4M1