Published at 5:00 p.m.
Free to invest батьків under parental supervision
When you’re a minor, you can’t exercise all your rights, says Charles Rio-Rousseau, a senior financial planning analyst at RGP Wealth Management.
“The money is managed by the father, and when the child turns 18, the bill is transferred directly to her. Parents do not keep money. He is the guardian and manages the money on behalf of the child. »
When a child has $ 25,000 or more, the money should be managed by the family council or the curator’s community. From November 2022, the amount will be increased to $ 40,000.
“No matter what, taking the first steps in investing, investing money, managing your budget, and not spending it all is interesting and stimulating,” said Charles Rio Rousseau in a telephone interview.
There is no unlimited access to the entire planet
Does a grocer who is addicted to video games dream of cryptocurrency to buy a house in the metaworld? Does a cafe waitress who loves TikTok want to invest in the shares of her favorite hobby company? Impossible!
By law, young people under the age of 18 do not have access to any employment. They must comply with the rule of expected sound investment.
“It’s not just a guaranteed investment,” explains the planner.
But this cannot be a risky investment that we make together with the son-in-law in a little-known company. Neither cryptocurrency nor NFT that could interest young people.
Charles Rio Rousseau, Senior Financial Planning Analyst, RGP Wealth Management
NFTs (constant markeror fixed tokens) are fashionable digital certificates that authenticate a virtual item, such as illustrations, tweets, and memes.
If we buy shares, they must be a Canadian company that has been listed on the stock exchange for more than three years, says Charles Rio Rousseau. If they are bonds, they must be guaranteed by the Canadian government, municipality or school board or utility company in Canada.
If you choose a mutual fund, 60% of its value should be in a presumably safe investment. The fund can be distributed as follows: 30% of bonds, 30% of Canadian shares, and the remaining 40% can be foreign shares.
The same rule for exchange traded funds (ETFs): 60% should be in presumably safe investments and 40% in foreign securities.
TFSA is not offered to most
Young people under the age of 18 do not have access to TFSA, but may have access to RRSP. By filing their tax returns, they accumulate RRSP rights each year.
“Of course, 18% of $ 5,000 is not so much,” says the planner. As young people do not pay taxes, it is better to save the contribution room for later. »
Gold mine: RESP
However, contributing to a registered education savings plan (RESP) is a good option. If the parents have already opened an account, the child can open a second one, where he will be both the owner of the account and the beneficiary. “Again, it is the father who opens the account as a caregiver on behalf of the child,” said Charles Rio Rousseau.
If parents have never paid the maximum, there will be interesting room for government subsidies. Who can now boast a 30% return? This is a real gold mine when you are 14 years old.
The maximum amount that can be invested in accounts per beneficiary is $ 36,000 to receive 20% of subsidies from the Government of Canada and 10% of subsidies from the Government of Quebec. Amounts paid from $ 36,000 to a maximum of $ 50,000 do not receive a subsidy.
“There are rules to follow for those who have never opened a RESP,” said Charles Rio Rousseau. If you are 14 years old and your parents have never contributed, you can contribute $ 5,000 to receive grants and then make up $ 5,000 for the following years to 17 years. »
The invested capital will not be taxed upon withdrawal. Grants and investment income will be taxed in the name of the child.
Unregistered investments are prohibited for parents
On unregistered accounts, income will be taxed annually in the name of the child. “It doesn’t have to be an account where the child and the father put the money. Sharing income with our children would be too easy, says the planner. This should be the money the child has earned, with supporting evidence. »
Investments in a RESP or unregistered account must be considered safe.
Invest to make an impact and get rich
Solenn Daigl, president of the Quebec Club for Responsible Investment, where young scientists and professionals meet to discuss investment, said young investors want to influence society by taking advantage of current challenges.
In general, they want to have a moral axis in the way of investing, fitting into the technological transition, she explains.
“Young people are trying to follow trends. We are in a period of transformation, whether to a low-carbon economy, technological support due to a pandemic or food security crisis, in particular due to the war in Ukraine. Because of these major problems, we wonder how we can take advantage of them and where we can invest. »
What does long-term investing mean?
When you invest your money, it is usually in the long run, explains Charles Rio Rousseau. But what does “long term” mean in the sense of a 14-year-old? Graduation?
Investing part of your income from work to buy a car at the age of 18 may seem like a distant horizon when you are only 14 years old. However, this is not such a “long-term period” as for a 25-year-old young man who invests in retirement, the planner said. “Therefore, we could qualify the projects of these young people as medium-term. »
In summary, we do not invest the money we want to withdraw in two months.
What projects can they dream of?
14-year-olds were interviewed Press said they had saved 75% of their salary. Thus, by earning $ 120 a week, an employee manages to save $ 90 a week. Let’s see if this savings will be enough to implement the plan.
For profit, we took the standards of the Quebec Institute of Financial Planning (IQPF), ie 3.3% for a portfolio consisting of 50% of shares, 45% of fixed income and 5% of cash.
Buying a used car at age 18 for $ 8,000
- The project is available at $ 36.46 per week for four years.
- Investing $ 90 a week for four years, the investment reaches $ 18,428.92.
Travel to Asia for 20 out of $ 10,000
- The project is available at $ 30 per week for six years.
- Investing $ 90 a week, in six years, the investment reaches $ 28,580.69.
Buy a house for 30 with a down payment of $ 30,000
- The project is available at $ 28 per week for 16 years.
- Investing $ 90 a week, in 16 years, the investment reaches $ 90,516.
Investment sectors that ignite young people
With a low-carbon transition, there are many possibilities, including solar, wind, hydropower, or the Internet of Things, that are used to regulate and support the consumption of this energy, says Solen Deigl. Companies that work in these areas, as well as those that invest in water, veganism or promote vertical farming on a large or small scale, are more likely to turn to young investors, according to the president’s observations in his Responsible Investment Club. Quebec.
How do I find placements?
“Even if mutual funds are considered an old method, they are easy for beginners to understand,” says Solen Daigl. We understand that the fund is backed by someone who chooses the assets and makes sure they work. Instead of analyzing the company yourself, look at the general criteria for whether or not it fits into the fund. »
I offer funds because it is a great entry into the stock market in the context of a pandemic and an unstable transition world.
Solen Deigl, president of the Quebec Responsible Investment Club
“If we don’t have economic ideas, we don’t understand why a company that makes a lot of money doesn’t work in the stock market or vice versa,” she said. Solenne Daigle offers stock market training on the CIRANO website (Burstad stock market simulations). You can register for free.
To find a mutual or exchange-traded fund, you need to go through a financial institution or online platform.
Are parents losing money?
In Quebec, child support does not apply to children attending school.
At the federal level, there is an amount for dependents, but it is only available if the parents do not have a husband / wife and the child is under 18 years of age.
In 2021, the corresponding dependent loan amounted to 1729 US dollars, which is not repayable. “One parent with a dependent child, who would earn $ 3,808 in 2021, will receive a non-refundable tax credit of $ 1,253, which is $ 476 less than the full amount,” explains Charles Rio-Rousseau.