There are more and more single mothers in Quebec: these women decide not to wait any longer to find love to start a family. This comes with a lot of responsibilities, especially financial ones. How do you get by when you don’t win in the six figures in Montreal?
Anaïs*, 32, had been dreaming of becoming a mother for a long time when she decided to stop waiting to meet “the right one” to start her family. She therefore undertook medically assisted procreation (MAP) and now has a 2-year-old son. Soon, she wants to have a second child and, ideally, a third. She has very good control of her expenses, no debt and she saves small amounts each week. She estimates that she could even save a little more. It must also provide for the costs of the next assisted reproduction procedures. For the past year, she has been employed by the government and earns $51,000 a year. Despite her stable job, her pension fund and her good management of her personal finances, she has many questions about her financial future.
“Could I one day become a landlord in Montreal? Provide extracurricular activities, sports and day camps for my children? Continue to eat well, travel, save for my children’s future and have enough money for my retirement? »
Annual salary: $51,000
Pension funds: Government and Public Employees Retirement Plan (RREGOP)
Registered Retirement Savings Plan (RRSP) in the Solidarity Fund QFL: $6,600 with automatic deduction of 2% on each pay
Other RRSP: $17,000 placed at moderate risk with direct debit of $25 per week
Registered Education Savings Plan (RESP): $1,900 placed at moderate risk with direct debit of $25 per week
Tax-Free Savings Account (TFSA) for retirement: $4,300 placed at moderate risk with direct debit of $25 per week
Emergency fund: $8,600 in a TFSA
Current account: $5200, of which $3000-4000 is for his next PMA
Monthly rent: $1050 for a 6½
First, it is obvious from the first glance that Anaïs has good control of her personal finances, and that is why she is doing so well alone with her child. But to get a better idea of his situation in his old age, Simon Préfontaine, financial planner at Lafond Services Financiers, made a retirement projection. Let’s say she continues exactly like that, with her pension fund, her weekly investments, her modest portfolio and considering that everything she has in her RESP will go to her child. If she works until age 65, following the standards of the Institut québécois de planification financière, she will have about $45,600 a year net, in today’s dollars, until age 95. If she decides to stop saving for retirement and rely solely on her pension fund and accumulated savings, she would have $40,000.
Anaïs must still keep in mind that it was the arrival of RREGOP in her life that changed the situation for her retirement. “Certainly if she ever stops working for the government, she will have to revise her plan and try to find another job with a very good pension fund, or a job with a better salary that will save her money. large sums for retirement,” warns the financial planner.
One thing is certain, if Anaïs no longer has to save for her retirement, it means that she has just freed up money that she can put aside for something else. As for her emergency fund, Simon Préfontaine suggests that she increase it to $10,000 to have peace of mind, since she is alone to assume all the financial responsibilities of her family.
He also draws her attention to his RESP. “She has every advantage in maximizing it to get the $750 in government grants she will get each year by contributing $2,500, which means $48.08 a week. »
Then, Anaïs will have to look at what her priorities are, says the financial planner. Are these the activities for his children? Does she plan to send them to private school? Does she prioritize travel? Is it very important for her to buy a property?
Simon Préfontaine also draws his attention to this last point. “Right now she has a big place that doesn’t cost her much, but what will she do if she ever gets evicted?” She would then risk finding herself having to pay a much more expensive and probably smaller rent. She must think about what she will do to mitigate this risk. »
For example, if she decides to buy within the next 15 years, she would benefit from taking advantage of the new TFSAPP to build up her down payment. This new registered plan allows you to contribute up to $8,000 per year, entitles you to a tax deduction for the amount contributed and investment income is not taxable.
She could also use the Home Buyers’ Plan (HBP) with what she has in her RRSPs, to provide part of her down payment. “But she should then consult a financial planner to see the impact of this withdrawal on her retirement projection,” he adds.
The financial planner also advises Anaïs to review her risk tolerance. “A moderate portfolio at his age for long-term investments is rare,” he says. Especially since she doesn’t really need this money, because her pension fund should provide her with a good retirement. Normally, we see more of a balanced or growth portfolio. »
But she still needs to make sure she could live well with a riskier portfolio, without stressing herself out with the ups and downs. “It is through education that this is possible, so I advise him to sit down with his adviser so that he takes the time to explain to him how it works, says Simon Préfontaine. But if she decides to stick with her moderate portfolio, that’s okay too, because she doesn’t need to make more of a return to get there. »
Anaïs would also benefit from consulting a financial security advisor to discuss her insurance needs. “As her family depends on her, she may need to take out insurance to supplement what her employer gives her, whether it’s life, disability or critical illness insurance,” says Simon Préfontaine.
She must also think about drafting her will and her protection mandate, with a notary. “Thus, adds Simon Préfontaine, she and her children will be well protected legally and financially. »
