1. 529 Account

You can use any of the several tax free savings accounts available to raise a fund for your child’s education. The 529 account is immensely popular.

You have to pay taxes for the money you deposit in a 529 account. But you don’t have to pay annual taxes on the interest, and you are not taxed for the money you withdraw from a 529 account on condition that you use it only to meet your child’s educational expenses such as books, tuitions, accomodation, and so on.

In a 529 account, the maximum annual amount you can deposit is $200,000. You need a money manager to handle the funds you contribute to a 529 account. The biggest advantage of this plan is that the money in the 529 plan is the property of the owner of the account. If the parents of the kid set up this account, the kid stands a better chance of getting the required financial help.

If one of your children is averse to a college education, you could spend that money on another of your children who might long for an education.

2. Coverdell Education Fund

The Coverdell Education Fund is yet another tax free savings account to raise funds for education. Basically, it is the same as the 529 plan, but with a few differences.

The maximum amount you can deposit per year in a Coverdell Fund is only $2000, which won’t be insufficient if you have begun saving for your child’s education very late in life. However, you don’t need a money manager here, and you are in total control of your Coverdell Fund.

The biggest disadvantage is that the Coverdell Fund belongs to the student, which he or she can misuse and therefore, get lesser financial aid. Your child owns the money that you put in a Coverdell account and gains complete control over it once he or she turns 21. Children could misuse this money and spend it on things other than their college education. This won’t happen in a 529 plan.

You are the best person to decide which is the best type of tax free savings account to fund your child’s college education. Education is expensive, and to give your child the best there is, creating a fund at the earliest possible is absolutely necessary.

About the Author:

Abhishek is a Tax Consultant and he has got some great tips on Filing And Understanding Taxes! Download his FREE 84 Pages Ebook, “Taxes Made Easy!” from his website http://www.Taxes-Guru.com/777/index.htm . Only limited Free Copies available.

For many years Canadians have been relying on the income from their RRSP, which was instituted in 1957, to fund their retirement years.

Now, however, the small rates of return, taxes and inflation are threatening to reduce the income generated by RRSP’s to a barely livable amount.

When you retire after 20, 30 or 40 years of earning an income, you expect to reap the rewards of your hard work and good planning.

The RRSP was meant to provide financial security to the Canadian taxpayer and it actually pre-dates the Canada Pension Plan by almost 10 years!

What is an RRSP?

RRSP is an acronym for: Registered Retirement Savings Plan.

It means that you have started a savings plan for your retirement and you have told the Government so, by registering it with an accredited seller of the plan.

That’s it!

Because you have taken the initiative to financially support your retirement, thus lessening the burden on the Government, you will get some benefits from purchasing and funding your RRSP.

What are the benefits of an RRSP?

• Tax reduction

• Tax deferral

• First time home buying/Continuing education

Tax reduction:

Your taxable income will be reduced dollar for dollar by the amount you contribute to your RRSP.

As an example: If your income is $55,000 per year and you contribute $5,000 to the plan you will pay taxes only on $50,000 for that year.

Tax deferral:

The income in the RRSP is tax sheltered until you make a withdrawal or upon retirement.

First time home buying/Continuing education:

Home buyers are allowed to make a one time withdrawal of funds in their RRSP to help purchase their first home.

However the rules for utilizing this strategy seem to change often, so do your homework or ask the advice of a professional with expertise in this using strategy.

As a retirement planning tool the RRSP is still a good strategy.

However, due to the increasing restrictions being placed on the contributions to the plan, it is not the most effective and should be used in conjunction with other more tax effective and income producing strategies.

As an example:

More and more Canadians are earning incomes in excess of $100,000/Yrly; however, the maximum allowable contribution per annum is capped at %18 or $19,000.

This will not provide much of a tax relief and in Canada this individual will still be taxed at the highest tax rate.

The banks and the Government do benefit when taxpayers employ the RRSP as their only tax reduction and retirement strategy.

So, it is in each individual income earner’s best interest to become financially knowledgeable and empowered to ensure that they are using as many effective retirement planning tools as are available.

Don’t let poor planning put your retirement at risk!

About the Author:

Canadians! Is an RRSP really the best financial plan for your retirement income?

Yvonne does not think it is and she is passionate in her efforts to demonstrate why she feels this way and show you a “Better Alternative to the RRSP”

For a free 1 hour consultation, call Yvonne at: (647) 281-5074