You’re the parent of a youngster with a first-time summer job – and that means he or she will be enjoying a brand new income stream. But what streams in can quickly stream out without good money management skills. Here are a few tips to help make the most of your youngster’s summer job money.

An early wake-up call is best

How your youngster will handle money as an adult depends on the habits he or she has learned from you growing up. Start early by motivating your youngster to become a regular saver and investor by setting a good example to follow.

Immediate enjoyment isn’t best

It’s tough to resist pervasive advertising and the ‘gotta have it’ emotion – but explain to your youngster that effective money management starts with always controlling expenses so they don’t exceed income. Help them create a realistic budget with measurable and attainable goals.

Get right with the CRA

If your youngster’s job results in a T4 (statement of remuneration paid that is issued by an employer) he or she should file an income tax return because even if their income is below taxable levels, they will start accumulating RRSP room that can be carried forward indefinitely. If your child is 19, he or she should also apply for the GST/HST credit on each tax return and will probably be eligible for quarterly GST/HST credit cheques.

Take advantage of tax relief available to students (1)

Scholarships and bursaries are not taxable when the student is entitled to claim the Education Tax Credit.

Interest paid on a student loan is eligible for a tax credit when the loan is part of a federal or provincial student loan program.

Moving expenses are also a tax deduction if the student moves more than 40 kilometres to be closer to school or to take a summer job.

Available tax credits can include the Canada Employment Credit, tuition fees for approved study course, an Education amount for each month of enrolment, a textbook credit, and a Public Transit Pass Credit.

Obey the 10 per cent rule

Explain that he or she will enjoy a much richer tomorrow by always saving 10 per cent of their take-home pay. By doing so, he or she takes full advantage of the miracle of compound interest. Use this dramatic example: Invest $1 a day for 40 years at a five per cent interest rate and they’ll have about $44,000. (2)

Now is the time to put your youngster on the path to a comfortable financial future. Sometimes an external informed opinion can help – so give your professional advisor a call.

(1) Information in this article is based on federal rules only. Provincial and territorial rules may differ.

(2) The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values or returns on investment.

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.

Contact David Brown at 250-315-0241 or at [email protected] to book your appointment.