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Fact: marriage is hard. Fact: talking about money is awkward. Put these together and you’ve got a combination that most people prefer to avoid: talking to your spouse about money.
It is hardly surprising that money is the number one stumbling block among couples, given that money issues are often loaded with prejudices, guilt, fear and anxiety. Avoiding discussions that could pre-empt later arguments may be shortsighted, but in the moment, it just seems, well, easier.
What if there was a way you could make money discussions [http://www.goldengirlfinance.ca/articles/marriage-couples/wedding-pre-game-talk-five-must-discuss-topics-before-saying-i-do] with your honey more pleasant and less likely to spiral out of control and into a fight? Would you be willing to try?
Financial experts advise that the right thing to do is hold a monthly meeting to evaluate the state of household finances, debt and savings goals. Involving your kids in the discussion is also a great way to teach them about transparency and responsibility, while reinforcing the act of making decisions as a family.
While there is no one way of doing things that works for everyone, here are a few do’s and don’ts to help you find the right mix of love and money.
- Do book a standing time and date. Say, noon on the first Saturday of every month. Make sure it’s marked in the calendars of both you and your spouse as a non-negotiable appointment.
- Don’t leave money talks to the end of the day. When you’re already tired and on edge, the last thing anyone needs is to talk about something potentially stressful. Get together over lunch or outside on a sunny day.
- Do stay focused. Your purpose is to review each area of your household spending [http://www.goldengirlfinance.ca/articles/credit-debt/live-within-your-means] and decide if it’s on track or can be improved. If you go too far and start examining how much each person earned over the month and what each person spent every dime of their income on, things can become overly intrusive and exhausting.
- Do allow for some privacy. You want to have full disclosure over the household matters that affect you both and the spending decisions that affect your future together. But do you really want to ‘fess up to how much you spend on face cream each month? As long as obligations are met, give each other a bit of a break when it comes to modest personal spending.
- Do make paperwork. At your first meeting, make a chart that outlines all the must-do monthly expenses, such as mortgage or rent payments, utility bills, phone bills and car and loan payments. Add discretionary but necessary expenses, such as groceries, parking and transportation. Keep track of annual or semi-regular payments such as school fees, insurance payments and taxes. Each month, enter the actual amounts paid in each category, so you build an ongoing track record.
- Don’t wing it. Keep a file that gets stuffed with receipts and statements that come in over the month so that when you meet, you will have facts on hand to work with and can do accurate calculations.
- Do make savings and debt repayment a priority. There’s nothing that motivates like making a goal and seeing your tangible progress toward it. What are we saving for? How quickly can we free ourselves from this debt? Write these goals down and agree on one or two action steps that you each take and confirm each month.
- Don’t overcomplicate. Your lives are already busy enough—printing out your bank and credit card statements once a month to review might just be enough to help you see where the money is coming and going. Dividing up tasks in terms of bill payment or savings activities is the next step.
- Don’t launch a money discussion by surprise. You may have organized your thoughts and arguments and be ready to talk, but it’s not fair to surprise your spouse with a money chat when their mind may be focused on getting dinner ready or preparing for a meeting at work.
- Do associate money chats with something fun. Make a plan to deal with the finances over cocktails, or order pizza and aim to finish your meeting before it arrives. Reward yourselves by making popcorn and watching a movie together afterward. Over time, you will learn to compare notes and review the accounts quickly and painlessly so you can get on to the fun and relaxing part.
Love before money
Controlling tempers and withholding judgments seems to be the toughest part about money discussions. If matters of resentment or anger arise, tread carefully, hold hands and recognize that getting to the heart of the matter can only help in the long run.
You did say for richer or poorer, right? Here’s hoping for richer! And remember—the family that saves together, stays together.
Your RESP Rule Book
You don’t have to be Kate Gosselin, an unemployed reality television star and single mom with a brood of eight kids, to be stressed about the costs of paying for your kids’ post-secondary education. Most parents are concerned (and confused) about how to set aside money in a Registered Education Savings Plan. Enter Golden Girl Finance expert Rhonda Sherwood, a Wealth Advisor at ScotiaMcLeod in Vancouver, to help sort through the RESP rulebook and provide savvy ‘school-savings’ tips to get started!
- Sign up the aunties. Have you always wanted to be an extravagant Auntie Mame? Are you a doting godmother or a grandmother extraordinaire? You can set up an individual RESP for other people’s kids (OPK)—all you need is the child’s social insurance number. You decide how to invest the funds and if the kid decides not to go to school, the money you’ve contributed is still yours and can be moved into your RRSP.
- Per kid, not per plan. If your child does have a generous relly or family friend contributing to her college funds, make sure you know how much is being invested each year. Within an RESP, the annual government credits and contribution maximums apply on a ‘per kid’ basis, not on a ‘per plan’ basis.
- Know the limits. You (and any other benefactors) can contribute a lifetime maximum of $50,000 towards a child’s education within an RESP. The Canada Education Savings Grant (CESG) will match your funds by 20% to an annual maximum of $500 per year, up to a lifetime maximum of $7,200. Remember again, this is per kid, not per plan.
- Types of plans. An individual beneficiary plan is an RESP for the use of only one child. The subscriber (person who sets up the plan) can be any adult, not necessarily related. A family beneficiary plan can only be opened by a “blood relative” (related through birth or adoption). The family plan is more flexible with multiple kids involved—funds can be applied to each sibling’s tuition as needed.
- Don’t use it—don’t lose it. Suppose you’ve diligently saved for your kids’ education through RESPs and then they all run off to Europe or Hollywood, forsaking post-secondary education. Well, you’ve done your best. The government contributions will have to be returned, but the funds you’ve saved can be redirected to your RRSP (if you have contribution room)—so at least your retirement nest egg will get a boost.
- Invest early, invest often. Many couples think about RESPs when a child is born, but they can be opened at any point—you can even open one for yourself if you have plans to go back to school. Government grants such as the CESG however, are only applicable for those up to age 17. In order to make the most of compound interest, start the fund as early as possible, even if it means only contributing as little as $25 or $50 a month.
- Get the free money. In addition to the CESG, there are a range of Canadian grants available depending on your eligibility. Check into the Canada Learning Bond (CLB), the Alberta Centennial Education Savings Plan (ACES), the Quebec Education Savings Incentive (QESI) and the Universal Child Care Benefit (UCCB). Ask an advisor to help you find any other grants you may qualify for.
- Tax shelter yes; tax refund no. RESPs provide tax-sheltered savings, so that any dividends or interest you earn will not be taxable while you’re saving. Unlike an RRSP however, your annual contributions are not tax-deductible. If you close the fund prematurely, any dividends and interest will become taxable, along with a penalty fee of 20% on those earnings—likely wiping out any gains you may have made.
- Using the money. When it’s time to go to school, the student will choose which portion of money to withdraw from the RESP. The money you’ve saved is called Post-Secondary Education (PSE) contributions. The portion that comes from government grants is called Educational Assistance Payments (EAP). The latter is taxable in the hands of the student, the former is not. The trick is to use up the EAP first, since any unused EAP will have to be returned. With the student in a low tax bracket, the effect should be negligible.
- Statute of limitations. An RESP can remain open for 35 years—plenty of time for that kid of yours to take a ‘gap year’ or figure themselves out before embarking on a four-year program. If, after 35 years, university just ain’t gonna happen and there is no other sibling to whom you can transfer the funds, the RESP must be closed. The EAP will be returned and the earnings taxed. Or use the funds yourself and go back to school!
Rhonda advises that RESPs are pretty standard, since they are such highly regulated plans. Therefore, you won’t gain much from shopping around. Choose an institution where you have a relationship, bring in a budget of what you can spend and ask an advisor to help you to choose investments. Hopefully, your prodigy will go on to make you proud!
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