INVESTMENT PLAN TAILORED FOR FAMILY
Card games can get a little heated in the Kuppe household.
After all, Andreas and his wife Kimberley taught their teenage daughters Makenna and Sydney to try their best even if the stakes are merely bragging rights among family.
Certainly the couple in their mid-40s have tried to lead by example— especially when it comes to managing the household finances.
In that respect it’s been a long, hard-fought battle for the family in the bedroom community of Beaumont, just a few minutes south of Edmonton.
Like many families, money was especially tight in the early days. And yet they still managed to save.
“We live within our means, but it’s challenging to invest for the future and to know how to do it because there isn’t a lot of extra money to go around,” says Kuppe, a co-owner of a recreational power sports shop that sells ATVs, motorboats and snowmobiles. “We want to make every dollar count.”
It’s a familiar story. Balancing competing priorities is a common challenge for Alberta families. According to a recent online survey commissioned by Servus Credit Union, about one in two respondents stated retirement is their top priority.
But they often have other priorities, too. About one-third indicated saving for a vacation or an emergency fund were important. Another quarter stated debt repayment is a priority.
And to top it off, families like the Kuppes want to set aside a little money to help the children with university. While it can feel like a high wire act, it doesn’t have to be that way, says Servus financial adviser Kelsey Bennett.
“Families often just need help cutting through the confusion to show them that their financial goals are achievable,” says the adviser at Alberta’s largest credit union. And Bennett should know. She recently built the Kuppes a comprehensive plan that not only has them on track to retire, but they can also save for their kids’ education, pay off the mortgage a little faster, and still have cash for a winter vacation once a year.
“Basically, Kelsey consolidated all these competing goals into a unified plan,” Kuppe says.
Step 1 for Bennett was embarking on a fact-finding mission.
“We really try to get to know our members well because everyone’s financial plan is different,” says Bennett, who works at Servus’ Harvest Pointe branch in Edmonton.
And there are no cookie-cutter approaches, she adds.
But one thing all families— the Kuppes included— are looking for is some clarity about their financial future.
That’s why a big part of Bennett’s job involved running the numbers using comprehensive financial planning software to provide the Kuppes with a road map to help them reach all their goals.
Two key areas of focus were their RRSPs and RESPs. They had not contributed to either in several years. Instead, they chose to put any extra money they had into a non-registered savings account.
“We just didn’t know how to prioritize our savings, so we defaulted to just simply saving,” Kuppe says.
But Bennett helped them develop a strategy to make the most of both savings vehicles. She showed them how they could transfer savings from the open account to the RESP to catch up on missed contributions that would attract the federal grant worth 20 per cent of their annual contributions of up to $2,500 per child.
That’s $1,000 a year in free money from the government for their children’s education.
At the same time, she helped the couple set up an automatic pre-authorized contribution plan for their RRSPs. Again they have the opportunity to catch up on missed contribution room. But she also showed them how contributions will help them save on taxes over the long-term: deferring taxes on high income today while paying a lower rate on withdrawals in retirement.
The Kuppes also learned how they could get the most out of their savings with suitable investment strategies. Bennett suggested a GIC ladder strategy for their RESP. This would protect their money for the shortterm— their children will be enrolling in post-secondary in a couple of years— while allowing them to get the best interest rates available.
She also helped them develop an investment strategy for retirement that would grow their money faster over the long-term.
“Kelsey showed us that a GIC-only strategy won’t work for our retirement goals,” Andreas says.
Instead, she showed them how their contributions could be invested in mutual funds that in the long term generally offer better returns than GICs.
“These are long-term investments, we learned, and we need a long-term perspective,” he says. “It’s not about where we need to be tomorrow; it’s about where we need to go over the next 15 years.”
And the job doesn’t end there. Bennett will continue to meet with the Kuppes regularly to ensure they’re on track.
“We’ve also got to get a TFSA (tax free savings account) strategy going for them,” Bennett says.
While saving will always be a challenge, Andreas says it’s now easier, especially with Bennett in their corner.
“Before, we didn’t really know how to get to where we wanted to be,” he says.
“Now we know what our goals are and how we’re going to achieve them— and that makes a world of difference.”