Summer is in full swing, and if your children are gearing up for summer jobs, it's the perfect time to introduce them to a powerful financial tool:  the Registered Retirement Savings Plan (RRSP/RSP) and Tax Free Savings Account (TFSA)

Why Consider a RSP for Your Kids?

A RSP is beneficial for young earners because it offers "double-tax efficiency."  The contributions are tax deductible and contributions grow tax-free.  Withdrawals are taxed at the marginal tax rate (MTR) in the year of withdrawals.  This setup is advantageous for young individuals, whose current tax rate is typically lower than what it might be in the future. 

Investments made to an RSP plan often generate a tax refund, the tax refund (or a portion) can then be reinvested in a TFSA creating a "triple-tax efficiency" where TFSA contributions grow tax-free and ultimately do not incur income tax during accumulation and decumulation.

Key Strategies to Consider

• Capitalize on Earned Income - Any contributions to a RSP are limited to the amount of earned income your child makes in a year.  This means that money earned from summer jobs or part-time work can be invested for substantial long-term growth.
• Teach Long-Term Financial Planning - Investing early in a RSP educates your children on the concepts of investing, interest accumulation, and the impact of compound investing.
• Prepare for Future Flexibility - Funds from RSP contributions can be withdrawn at any time without penalties, some tax is withheld at source and is factored in when tax filing for applicable tax credit or refund due. 

Start the Conversation Now: Encouraging your children to invest in a RSP not only sets them up for a more secure financial future but also instills essential financial literacy skills from an early age.  

Let's empower our children with the knowledge and tools they need for lifelong financial success!

At MWFS, we're dedicated to making financial education accessible for the entire family.  We're here to assist you and your children in setting up a RSP and maximizing those first earnings.

We are here to help, please contact us and we would be happy to discuss ways of helping you and your loved ones!