An education member’s guide to maximizing a sudden windfall

Regardless of where you are on the pay grid, you’re all about making every dollar count.

Then out of the blue, you find out that you’re about to receive a bit of extra money.

Cha-ching.

However, before you start spending that incoming windfall, there are a few fruitful ways to put that money to good use according to where you are in life (and in your education career).

In your 20s—when you’re typically lower on the pay grid:

• Pay down debt such as credit cards, student/car loans, etc.
• Save for a down payment on your first home by contributing to a FHSA
• Maximize RRSP and TFSA contributions as much as possible (to start building wealth early in your career)
• Open up investment/savings accounts for other short- or long-term financial goals (i.e. to build up an emergency or summer cash flow fund)

Educator-specific tip: Assuming you are an education member with a defined benefit pension plan in place, your RRSP contribution room will typically become more limited the further you progress in your career (i.e. the more your pension benefit increases in value, the less RRSP contribution room you’ll have). So be sure to refer to your Notice of Assessment, provided by the CRA each year.

In your 30s, 40s, and 50s—as your life changes and family grows:

• Maximize RESP(and other investment) contributions
• Buyback pension credits for maternal/paternal/any other leaves you’ve taken
• Pay down/pay off your mortgage (beware of any penalties for paying off your mortgage early)
• Pay off other forms of debt (i.e. credit cards, credit lines, etc.)

Ahead in retirement—once you start collecting your pension income:

• Realize any goals you set for this time in your life
• Pay off leftover debt (such as a mortgage, loans, credit cards, etc.)
• Provide your children with a monetary advance on their inheritance (to help them achieve their own financial goals, sooner)
• Start an RESP/maximize contributions for any grandchildren you may have
• Give money to charities that are close to your heart (and benefit from a tax break in the process)

Since there are no restrictions on gifts in Canada, there are no limits to how much money you can give to your children and grandchildren as a living inheritance.

Just be sure to consult with a tax professional specializing in estate planning to ensure that you understand the tax implications for your exact windfall situation. Like any other major life decisions, it’s also important to have a sound financial plan in place before taking action to ensure you’re in the best possible position (without compromising your own finances/goals down the road).

If you’re looking for guidance when it comes receiving an unexpected windfall, educator-specific advice is just a click away.

Since 1975, over 18,000 education members and their families have turned to Educators Financial Group for unique solutions that offer a genuine understanding of their financial dreams and goals.

Have one of our financial specialists contact you today about your own dreams and goals.

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