Financial strategies tailored to you

In your 30s
Goal: Funding your child's university educaion
If you wish to fund part or all of your child's (or child-to-be's) post-secondary education (and parents aren't obligated, you know), it's ideal to start saving by the time your child is five, advises Paul W. Lermitte, family business consultant with Manulife Financial in Vancouver and author of Making Allowances: A Dollars and Sense Guide to Teaching Kids About Money (McGraw-Hill, 2002, $20.95). Consider starting an RESP, which benefits from compound interest. Additionally, the government tops up an RESP with a Canada Education Savings Grant (CESG) – 20 per cent of your RESP contributions, up to a maximum grant of $7,200. If, for example, you invest $2,500 a year from age one to 17 at seven per cent rate of return and add in the maximum allowable contributions, you’ll save a total of $97,522.13. The growth on the money you invested ($42,500) and the grant contributions ($7,200) is a staggering $55,022.13!
 
Goal: Building wealth
You may want to build up equity, either by paying down your mortgage or though investment vehicles. This may not sound exciting at first blush, but knocking down your mortgage amortization and paying less money to the bank in interest is a great feeling. What you choose to do, however, depends on your priorities and your situation, says Woods. For example, you could pay down the mortgage faster or you may prefer to invest your money in stocks, bonds, mutual funds, etc., if investing gets a higher rate of return than the interest you're paying on the mortgage.

Going off the rails
Even though 30-somethings are often mortgaged to the hilt, they may splurge on a bigger house than they can manage – lenders recommend you spend less than 32 per cent of your gross income on a mortgage – or fancy cars and electronic toys, according to Lermitte. "Before buying an item, wait 24 hours to consider if you really need it and what you might have to give up to have it," says Lermitte.

Best financial bet
Sit down for one hour every January and write out your Top 3 financial priorities for the year, suggests Lermitte. That will help guide you when trying to decide where to contribute (RRSP, RESP, mortgage, car, investments) and how much.

What to do with your income tax return?
If you get a better rate of return investing in an RRSP or RESP than the interest you will save by putting extra on the mortgage, it makes sense to invest in an RRSP or RESP with before-tax dollars.

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