Financial Planning-Optimum Strategy Assignment 2022

Financial Planning-Optimum Strategy
Introduction
The assignment involves financial planning for Majid and Mina and their daughter Hana. The
family has an annual income of $ 120000 and surplus of 8000 per year. Further, they have an
existing saving of $92000 on which they earn an interest of 0.55% Further, they have never
made any contribution to TFSA and RESP and accordingly wish to explore this opportunity so
as to save sufficient balance for their child welfare and education as well as for themselves on
retirement. The assignment seeks to find solution for the said planning so ad to maximise the
benefit.
Facts
Majid and Mina are a couple living in Ontario. They have one child, a daughter named Hana.
Hana is 11 years old and was born in Ontario. Majid and Mina value post-secondary education,
and are planning to cover the cost of at least a 4-year university program for Hana, when she
turns 18. However, they haven't taken advantage of an RESP account yet. In meeting with you,
as their financial advisor, they got some valuable information regarding the RESP account.
They haven't also had a TFSA account and are keeping all their savings of $92,000 in a joint
high-interest savings account, which currently yields 0.55% of interest. Both Majid and Mina
have been part of a defined benefit pension plan that guarantees 2% of the average of their best
5 years for each year of service, and have minimal (zero) RRSP room. They collectively make
$120,000 per year ($60,000 each) and have $8,000 of surplus in their cash flow every year that
can be saved and invested. You prepared investor's profiles for Majid and Mina and assessed
their risk tolerance. Based on those two factors, you believe you could recommend an
investment strategy that matches the clients profile and objectives and gives an annual return
of 7% for their savings and investments. They have a mortgage of $250,000 with an annual
interest rate of $2.49% for 5 years. They just renewed their mortgage.
Queries
(a) Propose an optimum RESP strategy.
(b) If funds, contributions and government grants, are deposited into the RESP at the
beginning of the year, how much money will there be in Hana's education fund 7 years
from now?
(c) If retirement savings are deposited at the beginning of the year, how much money will
there be in the retirement fund, 7 years from now?
(d) Does it make sense for Majid and Mina to pay down their mortgage with their savings?
Analysis to queries
First as the family is planning to set aside $60000 for chid education, they should do the same
instantly.
Further, the amount of $ 60000 shall be allocated between TFSA and RESP in such a manner
that maximum advantage is obtained.