Take Our Kids to Work and Help them to Make Wise Career Choices

Q. On November 1st, my employer will participate in the annual Take Our Kids to Work Day for high school students enrolled in Grade 9. It’s an opportunity to show my teenager where I work and to expose her to various career paths. How can I use the opportunity to teach my daughter about making informed career choices and to develop smart money savvy strategies early in her career? – Spenta K

A. From personal experience, I know the last thing on teenagers’ minds is saving for their retirement, however it’s smart to expose children to the realities of financial life. Teach them early that their retirement years will be much more comfortable and financially secure if they save more money. In fact, the most financially secure retirees will receive income from several sources. The choices they make early in their careers about their employers, their lifestyle, spending and saving habits, and their knowledge of government-sponsored plans all impact their retirement income. Knowing about various sources of retirement income allows individuals to start younger to accumulate more.

Employment – Working for an employer who offers a company-sponsored pension plan is an advantage because pension income forms the foundation of your retirement income. With most pensions, your employer matches your contributions. The maximum pension benefit is paid out retirement. Some of the better pension plans offer cost of living adjustments to pension income during retirement and pay a reduced pension to a surviving spouse.

Lifestyle and saving habits – Much has been written about living within your means and starting early to save for retirement. Starting a RSP early in your career maximizes the opportunity to reduce taxable income and allows savings to grow tax sheltered an RSP for longer. Anyone who doesn’t have a company-sponsored pension needs to save for retirement and an RSP may be the vehicle of choice. Accumulating non-registered savings provides another form of retirement income. Buying blue-chip, dividend-paying stocks in mutual funds or as direct share purchases provides dividend income during retirement or they can be sold to free up cash.

Government-sponsored plans – The government provides the Canada Pension Plan (CPP) for workers who contribute to the program over their careers. The pension amount depends on how much and for how long you have contributed. The pension can be taken as early as 60 years of age at a reduced rate, upon retirement at 65 years of age, or deferred to age 70 at an enhanced rate. The other government plan is Old Age Security (OAS). It is paid to Canadians and legal residents beginning at age 65 who have resided in Canada for at least 10 years since age 18. The maximum monthly amount is paid to those residents in Canada for 40 years after age 18. These government programs are not designed to replace RSP savings or company sponsored pension plans.

Bev Moir is a Senior Investment Executive and financial planner with The Moir Team at ScotiaMcLeod, Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member Canadian Investor Protection Fund (CIPF).

This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.