Starting in 2009, Canadians will be able to contribute their money into a tax-free savings account. This type of account will be available to all Canadians age 18 and over (19 in some provinces where 19 is the age of majority) who have a Social Insurance Number. A tax-free savings account (TSFA) can be a great addition to retirement planning as well as other financial planning needs. Due to the flexible nature of the account it can be used for all savings purposes.

The new tax-free savings account offers several advantages to Canadian residents. As much as five thousand dollars can be contributed annually (this amount will increase with inflation throughout the years in $500 increments), and any unused room can be carried forward if the maximum contribution is not met. Withdrawals are tax-free as well as creating future contribution opportunities. While contributions are not deductible, capital gains as well as other investment income that is earned in the TSFA are not subject to taxation. As well, any income earned as a result of this account and/or withdrawals will affect the person's eligibility for federal income-tested benefits and/or credits. Contributions to a spouse's (including common-law) TFSA are allowed; assets are transferable to the account upon the death of the spouse.

The TFSA will be a great savings tool for seniors and those who are planning for retirement. TFSAs provide more financial flexibility, as withdrawals are not subject to taxation (i.e. RRSPs). As circumstances can quickly change in a person's life, having financial options that come without being 'penalized' can provide more options that will not have a negative impact on locked-in financial assets. Along with other retirement savings plans, the TFSA will be a great addition for this goal.

The TSFA will be available starting in 2009 at most financial institutions; discuss with your financial advisor/banker when this will be available for you. It’s a wise idea to research all of your retirement savings options, including the type and/or amount of your life insurance.

Canada Savings Bonds are an option for Canadians looking for investment options. These bonds are issued by the Government of Canada and can be a safe and secure addition to your investment portfolio. Canada Savings Bonds (CSBs) and the Canada Premium Bond (CPBs) both offer a variety of features.

Canada Savings Bonds can be cashed in anytime of the year; the Premium Bonds can only be cashed in once a year. Both types of bonds are backed by the Government of Canada which makes both types of bonds more safe and secure for investors. These bonds are available for purchase for six months per year, beginning in early October until April 1. Be advised however, that the Minister of Finance has the ability to end the sales of these bonds at any time.

CSBs and CPBs are available in either:

Regular Interest Bonds:  These bonds earn simple interest at the rates which are determined by the Minister of Finance until the earlier of maturity and redemption. The simple interest is paid to the bond's owner on each annual anniversary until maturity, or at the time of redemption.

Compound Interest Bonds:  These earn compound interest as well as simple interest. The compound interest rates are determined by the Minister of Finance until the earlier of either maturity or redemption based on the earned interest on each annual anniversary of the issue date prior to maturity. Compound interest is payable at the time of redemption.

Compound interest CSBs may be exchanged at any time before maturity for the same denomination in regular interest CSBs of the same series. Payment of interest as well as compound interest CPBs may be exchanged for the same denomination in regular interest bonds of the same series plus payment of earned interest. Prior to 10 months of their issue date, regular interest CSBs can be exchanged for compound interest CSBs of the same series; regular interest CPBs may also be exchanged for the same denomination in compound interest CPBs of the same series.

The ownership of bonds can be transferred in certain situations, such as:

• Name change due to divorce, marriage, adoption and legal name change.
• To a beneficiary due to the death of the registered owner.
• If the registered owner has a spouse, or the bonds are owned/held by spouses, in the event of divorce; they can also be   stipulated in the written separation agreement in a form that is acceptable to the Bank of Canada.
• If transferred to the Canada Retirement Savings Plan and/or to the Canada Retirement Plan.

Additional names may be added as co-owner with the right of survivorship; the Bank of Canada must be notified via completion of the prescribed forms. Be advised that the term 'surviving co-owner' is not valid or applicable in Quebec; transferring ownership must apply to specific provincial laws.

Canada Savings Bonds may be redeemed by the lawful owner at any time. This can be accomplished by contacting any authorized sales agent in Canada; proper identification must be presented. CPBs may be redeemed either on the annual anniversary of the issue date or within 30 days afterwards. If the CPB is cashed in within the 30 day period no interest will be earned for the following period of the anniversary date. CPBs may be redeemed at other times under the following circumstances:

• Death of the lawful owner.
• Court order.
• Redemption proceeds are required by the lawful owner for the purposes of:
    To avoid bankruptcy.
    To be used to purchase a home using the Home Buyer’s Plan.
    To be used in furtherance of pursuing education via the Lifelong Learning Plan.

If bonds are redeemed within the first 3 months after their issue date, no interest is earned on them. As well, no interest is earned on bonds for the calendar month in which they are redeemed.

Bonds may only be purchased with Canadian currency and can only be owned by legal Canadian residents. More detailed information can be found at http://www.csb.gc.ca/eng/bonds_cpb.asp

The final installment in this 3 part series will focus on the Canadian Pension Plan Survivor Benefits. These benefits are paid to a deceased contributor's estate, surviving spouse or common-law partner and dependent children. There are three types of benefits:

• The death benefit. This is a one-time payment to, or on behalf of, the estate of the deceased CPP contributor;
• The survivor's pension. This is a monthly pension paid to the surviving spouse/common-law partner of the deceased contributor.
• The children's benefit. This is a monthly benefit paid for dependent children of the deceased contributor.

It is very important that these benefits be applied for; if they haven't been applied for you may lose benefits that are you are entitled to. In order for your survivors to be entitled to benefits there is a minimum contributory requirement of at least 3 years. If your Canada Pension Plan "contributory period" is longer than nine years, you must have contributed in:

• one third of the calendar years in your contributory period, or
• 10 calendar years, whichever is less

The Canadian Pension Plan death benefit

This is a one-time, lump-sum payment made to the estate of the deceased contributor. If there is no estate, then eligibility for this payment are as follows:

1. Person who is responsible for the funeral expenses.
2. The surviving spouse, common-law partner or next of kin may be eligible, in that order.

The amount of the death benefit will depend on how much and how long the deceased person contributed into the Canadian Pension Plan. The dollar amount is calculated by what the retirement pension would have been if the deceased had been 65 when death occurred; the benefit is equal to 6 months of this pension, up to a maximum of $2500.

The Canadian Pension Plan survivor's pension

The surviving legal spouse or common-law partner of a deceased contributor to the Canadian Pension Plan qualifies for this benefit. A person who is still a legal spouse but is separated at time of death may still be eligible if there is no current common-law partner. The amount the surviving spouse will receive depends on:

• Whether or not the spouse/common-law partner is also receiving a Canadian Pension Plan disability or retirement pension.
• How much, and how long the contributor paid into the plan.
• The age of the spouse/common-law partner when the contributor died.

CPP will first calculate how much the contributor's retirement pension is, or would have been, if he/she had been 65 when they died. A further calculation is then done based on the survivor's age at the time of the contributor's death. If the surviving spouse is:

• Aged 65 and over they will receive 60% of the contributor's retirement pension, if they are not receiving any other Canadian Pension Plan benefits.
• Aged 46-64, or under age 45 and disabled, or raising a dependent child, they will receive a flat rate plus 37.5% of the contributor's pension if they are not receiving any other Canadian Pension Plan benefits.
• Under the age of 45 and not disabled and not raising a dependent child, they will receive as above, but minus 1/120 for each month the spouse/common-law partner is under the age of 45 at the time of the contributor's death.
• Under the age of 35 and not disabled and not raising a dependent child, they will not be paid until they reach the age of 65, or become disabled.

The Canadian Pension Plan children's benefit

If a child has lost at least one parent who was a Canadian Pension Plan contributor, they may qualify for a benefit, provided that the deceased parent has met the contributory requirements. This benefit is paid as a flat rate that will be adjusted annually. If both parents are deceased and/or disabled and paid into the Canadian Pension Plan for the minimum amount of years, the child may qualify for 2 benefits. For children under the age of 18 this benefit is generally paid to the person that the child is living with. For children 18 years of age and older who are attending school fulltime (this includes college and university) the benefit will be directly paid to the child upon his/her application.

The Canada Pension Plan (CPP) is designed to provide basic benefits for contributors who retire or who become disabled. It is a taxable monthly benefit is paid to those who have contributed to the plan; it is based on how much and how long a person contributed to the plan as well as the age of retirement. Its function is to replace approximately 25% of the earning's of which the person's contributions are based.

Canadian Pension Plan offers 3 kinds of benefits:

• Retirement pension
• Disability benefits for contributors with a disability and their dependent children
• Survivor benefits which include the death benefit, the survivor’s pension and the children’s benefit

Retirement Pension

Qualification for CPP benefits requires at least one valid contribution to the Plan as well as:

• The applicant is at least 65 or
• The applicant is between 60 and 64 and meets the earning requirements

If the applicant is between the ages of 60 and 64 they must do one of the following in order to qualify for benefits:

• Stop working or
• Earn less than the specified amount ($884.58 for the 2008 year) the month preceding and the month following the month your pension begins.

Once pension benefits are received the applicant can work on an unlimited basis, however no more contributions to CPP will be eligible.

The age in which a person decides to take their Canadian Pension Plan determines the amount they will receive. The pension usually begins the month after the contributor turns 65. If you choose to receive this pension earlier than 65, the monthly payment will be smaller, if you choose to receive this pension later than 65 up to the age of 70 the monthly payment will be larger. The amount is adjusted 0.5% for each month before or after your 65th birthday from the time you begin to receive your benefits; this adjustment is permanent so if you choose to apply for your pension early the payments will not increase when you turn 65.

Several factors to consider regarding when to take your retirement pension are:

• Whether or not you are still working and contributing to the Plan
• The length of time in which you have made contributions
• How much you have earned (which may affect how much you’ve contributed)
• How much other retirement income you have
• The type of retirement you plan on having
• Your health

It is possible to get an estimate of your retirement pension at the CPP website. This can help you determine when to apply for retirement benefits, as well as give you an idea of how much you will receive should you apply for your benefits. If you decide to retire, it's best to apply for your Canadian Pension Plan benefits at least 6 months in advance; delay in application may result in lost benefits.

If you apply for your Canadian Pension Plan benefits after the age of 60, but before the age of 65 your pension starts at the latest of these following times:

• the month you specify on your application
• the month you stop working
• the month following your 60th birthday
• when your earnings are less than the allowable maximum pension payment for 2 months in a row

If you apply to begin receiving your benefits before you turn 65 or later you will begin to receive your benefits:

• the month of your 65th birthday
• the month you have specified on your application
• the 11th month prior to the month the CPP receives your application

Disability Benefits

The Canadian Pension Plan Disability Benefits provides a monthly benefit that is taxable to contributors who are disabled and to their dependent children. This benefit includes a fixed amount that everyone receives plus an additional amount that is based on your Canadian Pension Plan contributions during your entire working career; there is a maximum that can be received. Children under the age of 18 as well as children aged 18-25 who are attending school full time also receive a benefit (in 2008 the amount is $208.77); children can only receive this benefit if at least one parent is receiving the CPP disability benefit.

In order to qualify for this disability benefit the applicant must:

• be under 65
• have earned a specified minimum amount and contributed to CPP while working for a minimum amount of years
• have a severe and prolonged disability as defined by CPP legislation

The current legislation defines 'disability' as a physical and/or mental condition that is 'severe and prolonged' that regularly stops the applicant from being able to do any type of work. This relates to full-time, part-time as well as seasonal work; as well the applicant's disability is a long-term condition or is likely to result in death.

If the applicant has not contributed for enough years they may still qualify if:

• they have delayed applying and had enough years of contribution when they first became disabled and have been continuously disabled since then but now do not have enough contributions
• the applicant's CPP contributions were stopped/reduced due to raising children under the age of 7
• the applicant has obtained enough CPP credits from a former spouse/common-law partner through the credit sharing to make them eligible
• the applicant worked in another country in which Canada has a social security agreement and that when added to the CPP contributions equals the minimum requirement
• the applicant was medically incapable of applying

If a person is receiving Canadian Pension Plan disability benefits they will automatically convert into a retirement pension at the age of 65. There is no new application needed; however the retirement pension is usually lower than the disability benefit; applying for OAS benefits at this time is recommended. If the applicant is receiving retirement benefits when their disability benefits is approved CPP will automatically switch the applicant to disability benefits if it is clear that the disability started before the retirement pension began.

The next blog will address the Canada Pension Plan Survivor Benefits and will be posted in the next 2 weeks. For more information regarding disability insurance you can also refer to the information here. You can also visit the Canadian Pension Plan website for more detailed information.

Almost every senior in Canada will apply for their pension and benefits through Canada's Public Pensions. Basic financial assistance is also available to survivors and those who are too disabled too work, as well as their children through these programs. Canada's Public Pensions are delivered through the Old Age Security (OAS) and Canada Pension Plan (CPP). Having an understanding of the different programs as well as rules and regulations can help to determine what you are eligible for, and what will be required in the future.

Old Age Security Program

This is a monthly benefit that most Canadians are eligible for if they are 65 years of age or over and meet the residency requirements. Employment status and history are not factors that determine eligibility. Benefits paid out are subject to federal and provincial taxes; those with higher income will repay part or all of their benefits through this taxation system. Eligibility is determined solely by being 65, residing in Canada for at least 10 years once the age of 18 was reached, and:

• Being a Canadian citizen or legal resident of Canadian as of the day before the approval of the application or;
• If no longer living in Canada, having been a Canadian citizen/legal resident as of the day before they stopped living in Canada.

The amount of benefits received is determined by the length of residency in Canada. Any person who has lived in Canada for a total of at least 40 years after the age of 18 may qualify for full benefits. For those who haven't lived in Canada for at least 40 years since the age of 18, they may still be eligible for a full pension if they were 25 years of age or over on July 1, 1977 as well as:

• Was residing in Canada on July 1, 1977 or
• Was residing in Canada before July 1, 1977 after reaching 18 or
• Was in possession of a valid immigration visa on July 1, 1977

In these cases, the person must have lived in Canada for the 10 years immediately prior the approval of the OAS application. Absences during this 10 year period may be offset if, after reaching age 18, the applicant lived in Canada before these 10 years for a time period sufficient to total three times the length of absence, as well as resided in Canada for at least one year before the application’s approval.

For those whose absence from Canada was due to working abroad for a Canadian employer, i.e. armed forces, banks, this time can be counted as residency. Qualification is based on returning to Canada within 6 months of termination of employment or having turned 65 while still employed. Proof of employment as well as proof of physically returning to Canada must be provided. This provision may also apply to spouses and dependents and Canadians who have been working abroad for international organizations.
For Canadians who do not meet the criteria for a full OAS, they may qualify for a partial pension. This is calculated at the rate of 1/40 of the full monthly pension for each full year lived in Canada after the age of 18. This amount cannot be increased as a result of added years of residence in Canada once it has been approved. However, late applicants for OAS may be eligible to receive retroactive payments for up to 11 months plus the month in which the application was received if all conditions of eligibility have been met. If clients cancel their OAS benefits and later wish to have them reinstated, they are not entitled to any retroactive payments.

Guaranteed Income Supplement

The GIS is intended for Canadians who are receiving a basic, partial or full OAS pension and have little and/or no other income. These supplemental payments may start in the same month as the OAS payments, but must be re-applied for every year or by filing an income tax return by April 30. As this supplement is based on income, it will increase or decrease yearly depending on any changes in reported income. Unlike the OAS, the GIS is not subject to income tax. This supplement is not payable outside of Canada for more than 6 months, regardless of previous residential history. Applicants for the GIS must be receiving an OAS pension; there are certain income limits for the applicant as well as spouse/common-law partner. Sponsored immigrants from countries that Canada has agreements with are not eligible for GIS during their sponsorship period (10 year maximum) unless:

• Has resided in Canada for a minimum of 10 years since turning the age of 18 or
• Has resided in Canada as either a Canadian citizen or a permanent resident before or on March 6, 1996 and is eligible for benefits January 1, 2001 or earlier or
• Has been receiving OAS benefits for the month of March 1996 or earlier

The amount of the supplement is based on marital status as well as income. Any other income that the person is receiving i.e. foreign pension, interest, dividends, rental income, wages, worker's compensation payments, etc will be calculated to determine eligibility and/or amount of the benefit. This also applies to any income brought into the family by a spouse/common-law spouse. Income from the previous year is generally used to calculate the benefit for the current year that runs from the current July to the June of the following year. In cases where the applicant has retired and/or incurred loss of pension income an estimate for the current year can be substituted for the income for the preceding year.

The GIS is paid out in 2 basic payment rates: Single (includes widowed, divorced and/or separated people) and Married (where the spouse/common-law spouse doesn't receive either the basic OAS pension or the allowance). Although the supplement rate is higher for single people, each spouse/partner is entitled to benefits; the combined benefits therefore are usually higher than that of a single person. The maximum monthly benefit for a single person will be reduced $1.00 for every $2.00 of other monthly income. If  both spouses/partners are receiving the OAS pension, the monthly payment will be reduced $1.00 for every $4.00 of other monthly income. For a person who is receiving a partial OAS pension, the supplement may be increased by the difference of the partial pension and the full pension. If a spouse is a pensioner but their partner is not receiving either the OAS pension of the Allowance, the pensioner can apply for the Singles rate of the GIS and the supplement will be reduced by only $1.00 for every $4.00 of the combined monthly income. The first $1.00 reduction will be made only when the combined yearly income of both people has reached 12 times the basic OAS pension plus $48.00.

Allowance and Survivor's Allowance

This allowance is paid monthly and includes an allowance for those whose spouse/common-law partner has died. This allowance is designed to help those who are facing financial troubles; i.e. the surviving member of the relationship as well as those couples living on the pension of only one spouse. This allowance must be reapplied for annually and are not considered as income for tax purposes. For people living outside of Canada, this allowance cannot be paid out for more than 6 months, regardless of how long the person initially resided in Canada. The Allowance is paid to the spouse/common-law partner of a OAS pensioner, or to another qualified survivor. The person applying for the Allowance must be between the ages of 60-64 and have been living in Canada for at least 10 years since the age of 18. The applicant must have been a Canadian citizen or legal resident of Canada on the day before the application's approval. To qualify for the Allowance, the annual income of the survivor or the combined yearly income of the couple cannot exceed certain financial limits; these are established quarterly. The Allowance will be discontinued once the recipient becomes eligible for their OAS pension at 65, leaves Canada for a minimum of 6 months, or dies. For couples who receive the Allowance, payments will be discontinued if the pensioner spouse/partner ceases to meet the eligibility requirements for the Guaranteed Income Supplement, or if the couple separates/divorces. The Allowance will also stop if a survivor either remarries or lives in a common-law relationship for a period exceeding 12 months.

A sponsored spouse/common-law partner of an OAS recipient or survivor between 60 and 64 with less than 10 years of residence in Canada after reaching 18 is not eligible for the Allowance for the period of their sponsorship (up to a 10 year maximum), unless:

• Was receiving a pension in or before March 1996 or,
• Was residing or had resided in Canada as a Canadian citizen or permanent resident before March 7, 1996 and will be receiving a pension in or before January 2001

This is an income-tested benefit; the maximum payable amount to the spouse/common-law partner of a pensioner is equal to the combined full OAS pension and the maximum GIS at the married rate. The maximum amount for a person whose spouse/common-law partner has died will be somewhat higher. The maximum monthly Allowance is reduced $3.00 for every $4.00 of the beneficiary’s monthly income for a widowed spouse/common-law partner, or the couple’s combined monthly income. This will happen until the OAS-equivalent is reduced to zero; then for a couple the GIC equivalent of the Allowance portion and the pensioner’s GIC are reduced by $1.00 for every additional $4.00 of their combined monthly income. For survivors, the GIC equivalent portion is reduced $1.00 for every $2.00 of additional monthly income.

In the case of non-sponsored immigrants, the benefit will be prorated. Entitlement will be established at the rate of 1/10th of the benefit for year of residence in Canada after attaining the age of 18; this will be increased an additional 1/10th for every additional year of residence in Canada. This applies for people who haven’t resided in Canada for 10 year after turning 18 and:

• Had/was not residing in Canada as a Canadian citizen or permanent resident before March 7, 1996 or
• Was residing in Canada on or prior to that date as a Canadian citizen or permanent resident but will not be receiving a pension in or before January 2001

Information regarding the Canadian Pension Plan will be featured in the next blog as Part 2 of this article and will be posted in the next 2 weeks.

 Life insurance is an important part of every Canadian's financial security. Life insurance will ensure that your survivors are not encumbered with your debt, as well as providing them the finances that will enable them to live without your income. Therefore, it is imperative to make sure that any claim made against your life insurance policy does not get denied due to incorrect information on the application.

 Life insurance rates can be based on factors such as your health status, habits and/or lifestyle. Higher premiums will be applied to people who smoke, are grossly obese, and/or engage in "high risk" activities, i.e. skydiving, car racing, etc. These higher rates reflect the greater likelihood that you may die earlier than what is statistically determined for your age. Your life insurance application will ask questions regarding your health status in order to determine which rates you are eligible for.

Some people may be unclear about what is considered a "smoker". If, for instance, you only have a cigarette once every several months, you most likely do not consider yourself as a smoker. Your life insurance carrier, however, takes a very different view to this. You are considered a smoker if you have had any tobacco products within 12 months of applying for coverage. This also applies to smoking marijuana. Having the "odd" cigarette or smoking marijuana will constitute you as a smoker when you apply for your life insurance; thereby running the risk of having to pay a higher rate.

For those people who have the occasional cigarette, it may seem unfair that they have to pay the "smoker’s rate" and just identify as a non-smoker. However, "fudging" on your life insurance application means you risk potentially having your claim denied and/or delayed while it is under investigation. Even if smoking in no way contributed to the death, the failure to honestly answer the questions on the application may cause the carrier to conduct an investigation; it may also be grounds for the carrier to consider denying the claim.

Honesty is definitely the best policy when it comes to applying for insurance. This will ensure that should a claim be made it will be processed quickly and your beneficiaries will not have to experience any delays. If you are unsure about what health status you should use on your application, make an appointment and discuss these issues with your broker. Remember to discuss any and all activities that may be considered high risk in order to avoid confusion at a later date. Also remember to consult with your broker if your status changes, i.e. you have been tobacco free for a minimum of 12 months. Full disclosure on your application means that you and your family will have the security of knowing that you are insured, and that should something occur, your family will not be subjected to an unexpected delay while the claim is being processed.

With many Canadian children entering university or college this September, many parents are concerned about the rising costs of tuition. Even with government grants and/or loans, you may need to help supplement your child's tuition, as well as supplies, housing, etc. Saving for your child's higher education should be a part of your budget in order to have the necessary funds when they are needed. An RESP also allows others to deposit funds into the account, i.e. grandparents, friends, other relatives.
 
One alternative you may want to consider is using a Registered Education Savings Plan (RESP). This is a special savings account that you can set up that has the distinct purpose of saving money for your child's post secondary education. The Government of Canada allows this account to grow tax free until the child (the beneficiary) who is named in the RESP enrolls in their school of choice. Having an RESP also makes you eligible for such incentives like the Canadian Education Savings Grant and the Canada Learning Bond, which are only available to those who have an RESP.
 
An RESP can be opened through most financial institutions such as a bank or credit union. Some certified financial planners as well as group plan dealers may be RESP providers. Remember that some RESP providers may charge for service fees, and/or limit the amount and/or frequency of your contributions. Do some research to find the financial institution that will best suit your specific needs. All that is required to open up an RESP is your social insurance number as well as the social insurance number(s) of the child(ren) who will be benefiting from this plan. You will need to choose the type of RESP that will be the most beneficial for your specific needs. RESPs are available in 3 different types:
 
• Family Plan: This entitles you to name one or more children as the beneficiaries of this plan. A beneficiary must be related to you, but does not necessarily have to be your child; grandchildren and adopted children are also eligible for this program. A family plan will entitle you to name one or all of the children in order for them to be able to use the money while obtaining their post-secondary education. This is a good plan for those who do not wish to make regular monthly payments.
• Individual Plan: This is for one beneficiary only but does not have to be related to you. This plan also doesn't require monthly payments.
• Group Plan: This is administered by a group plan dealer; be advised that each plan will have its own rules. The group plan dealer typically will invest the money in low-risk securities, i.e. bonds, treasury bills and guaranteed income certificates (GICs). You will have to sign a contract agreeing to make regular payments into the plan over a certain time period. The group plan 'pools' your money with those of other participants (beneficiaries) who are of the same age. The total amount of money that each beneficiary gets is based on the amount in the pool, as well as the total number of students who are in school that year. You will be allowed to enter only one child (does not have to be related to you) in a group plan.
 
Once you have selected the type of RESP plan that is best suited for you, ask your RESP provider about all of your investment choices in order to fully understand the advantages and risks of your options. Some providers may offer a variety of investment options; others may already have a set investment plan in place.
 
The benefit of using an RESP is that the money will grow tax-free while it is in the RESP account. Any money that the investment earns will not be taxed until the money has been withdrawn to pay for your child's education. Money that is withdrawn from the RESP to pay tuition is taxed in the hands of the student. As students usually have little or no income, this withdrawal usually will be tax-free. The money that the investment earns while in an RESP will not be taxed until the RESP is closed due to the beneficiary not pursuing a higher education. If the beneficiary decides not to attend college or university, the money that you have contributed will be returned tax-free. The money that the investment earns while in an RESP will not be taxed until the RESP is closed due to the beneficiary not pursuing a higher education.

Statistics Canada is reporting that the rate of Canadians who smoke is on the decline. The highest decrease in smokers comes from the youth population, with teenagers aged 12 to 17 declining 14% in 2000/2001 to 8% in 2005. This decline is surmised to be from the fact that more Canadian teenagers are choosing not to start smoking, with 85% of teens reporting that they have not tried cigarettes. As the majority of smokers begin initially in their teenage years, these statistics are significant. Studies have shown that it is rare for adults to begin smoking if they did not smoke in their teenage years. This is the lowest rate of youth smokers in over 40 years in Canada.

Overall, the percentage of Canadian smokers age 12 and over has decreased from 23% to 22% since 2003. Canadian smokers are also reporting smoking less than previously as well. Canadians smoked an average of 13.1 cigarettes a day in 2003; the average in 2005 went down to 12.7 per day. The amount of non-smokers who are being exposed to second hand smoke is also decreasing, except for the youth population. While statistics show that fewer young Canadians even try smoking, they are more at risk of being exposed to second hand smoke. This is usually a result of being exposed to second hand smoke either in their homes and/or cars, or in public places that teens tend to gather at.

Smoking habits are also changing in Canada. More homes are now smoke-free, thereby reducing the number of people exposed to second hand smoke. In 2003 57% of Canadian homes did not allow smoking; this percentage has gone up to 64% as of 2005. With smoking now being banned in many public places, the risk of exposure has decreased from 29% to 23%. 68% of all Canadian workplaces are now smoke-free which is reducing not only the percentage of people exposed to cigarette smoke, but is also decreasing the amount of cigarettes being smoked throughout the day. The average amount of cigarettes smoked where smoking is permitted in the home and at work is 16 per day; when smoking is permitted in the home but banned at work, the number of cigarettes per day dropped to 14. If smoking was banned in the home but allowed in the workplace an average of 11 cigarettes were smoked daily. If smoking was banned in both the home and workplace, only 9 cigarettes a day were reported.

Recent studies have shown that 23% of Canadian men smoke; this rate is slightly lower for women at 20%. 28% of all smokers in Canada are between the ages of 18 to 34. British Columbia and Ontario have the lowest population of smokers at 18 and 21%; B.C. also has the highest rate of homes which have banned smoking (77 %). The territories have the highest rate of smokers; 30% of people living in the Yukon are smokers, 36% in the Northwest Territories, and 53% in Nunavut. While Nunavut has the highest rate of smokers, it has also experienced the sharpest decline in smokers, falling 12% since 2003. As well, 93% of workplaces in Nunavut have banned smoking as opposed to only 61% of smoke-free workplaces in Alberta. Quebec has the lowest rate of smoke-free homes, with only 47% banning smoking indoors.

This decrease in smoking is good news for Canadians. Fewer Canadians are picking up the habit, and those that do still smoke are smoking less. An improvement in health status can mean a decrease in your life insurance premiums; consult with your broker about this possibility.

Identity theft has quickly become one of the most fastest-rising crimes in Canada as well as the United States. By 2002, over 7000 Canadians had reported identity theft to the PhoneBusters National Call centre, with losses being reported at over $8 million. In the first quarter of 2003 alone, over another 2000 cases were reported, with estimated losses of more than $5 million. As well, 2 major Canadian credit bureaus have indicated that they have received approximately 1400-1800 Canadian identity theft complaints every month. The majority of these received complaints have been from residents of Ontario.

As Canadians are constantly becoming more reliant on using bank cards and/or credit cards, they can be leaving themselves at risk of someone gaining access to their data. As well, many Canadians are unaware of the personal information that their employer and/or government agencies have on file, which can also potentially be a target for identity thieves.

In order to protect yourself from identity theft you should be aware about how exactly most identity theft occurs. The most common ways that your information is accessed is:

• Theft of documents, credit cards, bank cards, etc. Theft of a wallet or purse is usually noticed very quickly. The owner can then call all of the credit card companies etc. to notify them of the theft in order to close those accounts. However, thieves have begun to also check people's mailboxes in order to steal bank statements as well as credit card statements, thereby gaining your information. Some banks also issue letters that contain "pre-approved credit card" offers; these can be stolen with the thief posing as you and asking for an address change. If you throw out any financial documents, including bill statements, make sure you shred them or otherwise destroy them first.
• Shoulder Surfing. Thieves can look over your shoulder or from a location nearby while you are using an ATM and gain access to your PIN. Then, by distracting you, your card can be switched with another one, now giving the thief (or thieves) access to your bank account. Another common method is by installing a fake ATM device that reads your card's encoded data. When using an ATM machine, guard your hand with the other one when keying in your PIN.
• Skimming. Your information can be stolen when thieves "skim" or "swipe" your credit card at restaurants, stores, etc with a device known as a skimmer. The skimmer records all your personal information data from the magnetic stripes on the back of your card. This information is then usually transferred to another location (commonly overseas) where it is re-encoded onto fraudulently made credit cards.
• Email spam. Most every Canadian has, by now, received an email purporting to be from their bank, paypal account, etc. that asks you to visit their website and update your information. Reputable banks or other financial institutions will never ask you to do this. This is a ploy for thieves to gather your personal information in order for illegal activities.
• Company and/or government database theft. There has been a significant increase of identity thieves trying to access large databases of personal information. This is happening in both the private as well as public business sectors.

To avoid being a victim of identity theft it is important to understand where the risk lies, and where you are potentially the most vulnerable. To minimize the risk of having your identity stolen:

• Sign any and all new credit cards immediately when receiving them and never lend them out to anyone.
• Keep a current list of all active cards you use and destroy ones that you longer use; update this list on a regular basis.
• Don't carry all of your identification with you if it is not needed on a daily basis (i.e. Social Insurance Number card, passport). These items should be stored in a secured environment until needed; they contain a lot of your personal information which if stolen, can be used to obtain fraudulent credit cards and bank accounts.
• Know your billing cycles. Notify your creditors and/or utility companies if your bills do not arrive at the same time each month (someone could be stealing them from your mailbox for the information).
• Closely check each itemized statement on your credit card bills in order to ensure that these actually are your purchases. Any discrepancy should be immediately reported to the issuing credit card company. Likewise, immediately report any card which you suspect is missing and/or stolen.
• Shred or otherwise effectively destroy any and all financial documents. This includes ATM receipts, credit card receipts, utility bills, as well as any other paper document that contains personal and/or account information. This also applies to any credit card applications that may be mailed to you.
• Make sure that any financial information you have in your home/office is stored securely, preferably locked up
• NEVER give any personal information over the phone, through the mail and/or over the internet unless it is you who has initiated contact and it is with someone you can verify. Reputable companies will never solicit you in this manner, so anyone who asks for your personal information in these ways is usually a thief.
• If you write down the passwords to your bank card, credit cards, etc. do not keep this information in your purse and/or wallet. If you need to have a written record of your passwords, store them safely, preferably in a locked storage space. This rule also applies to computer passwords.
• Check your credit report on a yearly basis in order to see that this information is correct and includes only your personally authorized activities.

If you have been the victim of identity theft, immediately report it to the bank and/or credit card issuer from which funds have been illegally obtained. You should also immediately report the illegal activity to your local police so that this information can be forwarded to the proper investigating department. Your creditor may require proof that you have made a police report in order to reimburse you for any unauthorized charges/withdrawals.

For more detailed information on identity theft, and to track the current trends in this area, Ontario residents can visit PhoneBusters. You can also use this resource to report any suspected criminal activity regarding your finances.

Most Canadians throughout the country will at some point in their life will apply for a mortgage. As with any other financial transactions, it is a good idea to do your homework and understand the complexities of your mortgage. Having a solid understanding of your finances as well as the different mortgage products available can help you make the best choice. Your mortgage will probably be the most important debt of your lifetime; making a well informed decision will benefit you for years to come.

You must determine how much you are able to afford to spend when buying a home. This includes not only the purchase price of the home, but all of your other financial obligations. Do not assume that the maximum amount you are pre-approved for is an amount you can actually afford. Figure out what your monthly expenses are, including car payments, insurance, groceries, cable, telephone, etc. You may want to track these expenses for a few months in order to get an accurate total of your monthly expenditures. It's also a good idea to set aside money for emergencies, i.e. car repairs, house maintenance, etc. Subtracting the amount of the monthly expenses (including savings) from your monthly income will give you an estimate of how much you can afford for a mortgage payment. The general rule is to not exceed 32% of your gross monthly income for housing costs, and no more than 40% on monthly debt payments.

Once you've decided on the amount you can afford, you will need to shop around for a lender. Banks, mortgage companies, insurance companies, trust and loan companies as well as credit unions can all offer mortgages. Different companies will offer different prices as well as conditions; talk to several different lenders, as well as types of lenders in order to get the best product for your specific needs. You may also want to consider using a mortgage broker. A mortgage broker does not directly lend money, but rather finds a lender best suited for your needs. Because mortgage brokers have access to a wide range of lenders you will usually have more choices regarding products and terms. If you choose to use a mortgage broker, remember that not all brokers have the same access to financial institutions so you may want to consider consulting with more than one broker.

When shopping for a mortgage, obtain the information you will need in order to compare products. In Canada it is federally regulated that all banks, insurance companies and trust and loan companies must provide you with the following information before you sign a mortgage agreement. If you are shopping for a fixed-rate mortgage you must be provided with:

• The amount being lent
• The term of the loan as well as the amortization period
• Total amount of payments at the end of the term, as well as how much of that total you will have paid in interest
• Annual interest rate, including the real annual percentage rate which includes any and all extra charges (APR)
• The actual date on which interest will begin to be charged
• The amount of the payment and the due date
• If your payments are first applied to cover the interest and other applicable charges, and then to the outstanding principal
• Any optional services, i.e. disability or life insurance, that you have accepted, as well as the cost and the penalties, rebates and/or charges that will be applied if you decide later to cancel these services
• Any default charges that will be applied if your mortgage is in default
• Description of any property that is being provided as security for the loan
• Any broker fees that are paid by the lender to a broker that are included in the amount being lent
• The fee you will have to pay to discharge the mortgage after it has been paid off
• Any other charges that may apply, including the type of charge and the amount

If you are applying for a variable-rate mortgage you must be provided with:

• The annual interest rate of your mortgage as of the date of the disclosure statement
• How and when the annual interest rate is calculated
• How much your payments are based on the annual interest rate
• What your total payments will be at the end of the term based on the annual interest rate
• If the interest rate variations are linked to a public index you must be provided at least once a year with a disclosure statement that contains the annual interest rate and outstanding balance and the beginning and end of the period covered by the statement. You must also be provided with the amount of each payment and when it is due based on the annual interest rate that is applied at the end of the period

If you are applying for a variable-rate mortgage and the amount of your payment is not automatically adjusted to reflect changes in the annual interest rate you must also be provided with:

• The annual interest rate above which your payments will not be sufficient to cover the interest due on your loan for the period
• You must be made aware that negative amortization can happen. This occurs when your outstanding balance increases even when payments are made in full

Federal law also prohibits the financial institution from unduly pressuring you to buy their other products as a condition for accepting your mortgage application. For instance, the institution cannot deny your mortgage application because you choose not to buy your mortgage life insurance from them. You have the right to shop around for not only your mortgage, but for any other financial products that you may need for your new home. It's wise to always compare different products from different institutions, lenders and/or brokers in order to assemble the best package for your personal needs.