The prospect of getting money back is just too good for this eager beaver so I file early every year. I case you’re wondering, I won’t be blowing my tax refund on a shopping spree. As MoneySense Senior Editor David Hodges illustrated in a recent issue, reinvesting the money back into your RRSP is definitely the way to go—the numbers speak for themselves.

That brings me to the reason for this blog post; one BIG reason. It jumped out at me as I tore the perforated edge on my crisp new cheque: “Your unused RRSP contribution room is….” Whoa!—I thought—that’s a big number. I guess I was so surprised because I’m a consistent saver. My RRSP contributions automatically come off every paycheque before I get a chance to spend the money. I’ve been saving this way since I entered the full-time workforce a few years ago.

But in retrospect, I shouldn’t have surprised at all. Here’s why: I’ve been filing income tax returns since I earned my first paycheque as a teenage snack bar attendant at a local hockey arena. That means I’ve been gaining RRSP contribution room every year since I served the first of countless hot chocolates to cold and weary hockey moms more than a decade ago.

Initially I was tempted to ignore the 5-figure number. After all, I’m not alone. Canadians have more than $600 billion in combined unused RRSP contribution room. These apathetic thoughts disappeared however as soon as I realized I just received a gift from my 16-year-old self.

You see, I’m lucky enough to work for an employer that provides a defined-benefit pension plan. For 2012, Canadians can claim the lower of 18% of their earned income or $22,970 as their RRSP deduction unless they are a member of parliament or have a DB pension plan. This second group can only claim that amount less what has been socked away in their other registered plan that year. This is called a pension adjustment (PA) and the amount is reported your T4 slip (Box 52, line 206). My best guess is that this rule exists to level the playing field for all Canadians saving for retirement. And while I’m not complaining by any means, the PA does reduce my personal RRSP annual contribution allowance by a substantial amount. So back to that gift…now that I’m a little older, a little wiser and earning a full-time salary I can tap that unused room and for the time being pay less tax. Sure, I’ll be taxed on my savings eventually, but if time my withdrawals properly (when my income is low) it shouldn’t sting too much.

So thank you 16-year-old me for the huge RRSP potential! Of course in order to realize this potential, adult me has to up my savings game. It will be impossible to catch up to my unused RRSP room in one year, especially this year of all years. (I’m getting married and the money coming in seems destined for everywhere and everything except my savings.) Instead, I’ll have to put a dent in the RRSP bucket over time by gradually increasing my personal savings rate. First thing’s first: Reinvest the tax refund cheque back into the RRSP. It’s a head start if I’ve ever seen one. And I’m on my way…

Many young adults find themselves in a stressful situation come tax time. It’s not uncommon for 20-somethings to move in with their significant others while at the same time starting a new career job and making their first RRSP contributions—all of which come with their own set of tax implications. For some, tax filing suddenly gets complicated.

The good news is the Canada Revenue Agency puts less emphasis on labels than, say, parents tend to. In a nutshell, if you’ve lived together for 12 straight months by Dec. 31, you are considered common-law and have to report as such by the April 30 income tax filing deadline. For more specifics on the CRA’s definition of common-law, click here.

The biggest misconception among new common-law couples is that they have to file together at the same time and on the same form, said H&R Block Senior Tax Analyst Cleo Hamel. That’s how it works in some U.S. states, but not in Canada.

“From a Canadian tax perspective, regardless or your marital status you are an individual taxpayer and you are required to file your own tax return,” Hamel said.

There is a question on everybody’s “Information about you” page however that asks what your marital status is as of Dec. 31.

If you meet the definition above you have to include your common-law partner’s name, social insurance number and their net income (Line 236) even if it’s zero, along with your personal own information.

The main change resulting from a new common-law living arrangement young adults tend to notice has to do with the GST quarterly payment, Hamel said. If as a single person you qualified for the GST rebate of up to $260, chances are once you become common-law you probably won’t qualify anymore. That’s because the government will combine your net incomes to see if you meet their definition of a low income family (less than $34,000 net income per household).

“I do have clients who say, well in that case, I don’t want to say that we are common because I want to continue getting that money,” Hamel said. “But that’s just not an option.” It’s illegal to lie on your tax return. To see if you qualify for the GST rebate, use the CRA’s calculator.

In cases where the couple may qualify for the GST rebate, one person does have to claim it and the quarterly cheque can only written in only one person’s name.

“In the end it doesn’t really matter who gets it, but it can be a really touchy point for some couples,” she said.

On the plus side, as a common-law couple you do get to pool some tax credits including medical expenses and charitable donations.

You’re entitled to a 15% credit on the first $200 of charitable donations and a 29% credit for every dollar over $200. By pooling your donations together you can reach the $200 threshold faster to get the most bang for your donation buck.

In cases where a couple’s combined medical expenses are high, the lower income spouse should claim the medical expenses tax credit (on Line 330) for both to maximize the medical credit that kicks in when bills exceed $2,109 or 3% of personal net income.

In cases where one partner is making little to no income, the working partner may be able to claim a spousal credit (Line 303). As Canadians, the first $10,822 we make is tax-free. If your common-law partner is making less than that, say he or she is a graduate student for instance, your tax-free income is doubled from $10,822 to $21,644 by claiming the spousal credit.

“That’s a significant savings,” Hamel said.

What’s more, the student spouse can claim all student-related tax credits (Line 323) with a qualifying tuition receipt and transfer any unused credits to their common-law partner (Line 324).

All these new tax implications may seem overwhelming but a certified tax accountant, tax preparer or online tax software can help.

It’s a good idea to notify the CRA if your marital status changes during the year (outside of the so-called “tax season”) by submitting the RC65 Form Change of Marital Status to ensure you’re getting the credits you’re entitled to.

It’s also worth mentioning that while the implications of being married or common-law are identical from a tax perspective, that’s not always the case when it comes to other financial milestones like estate planning, insurance, joint investments etc.

RRSP rookies typically wind up at the local branch of their financial institution within days of deadline day. And while there’s nothing wrong with that per say, it’s not necessarily the best approach for everyone.

“Initially, people are attracted by the significant amount of advertising that’s done during RRSP season,” says Harley Lockhart, chair of Advocis, The Financial Advisors Association of Canada.

The first thing RRSP newbies should do is check if their employer manages an RRSP program and whether they offer some kind of top up—aka free money.

“If the employer plan involves any kind of matching from the employer, a person would be unwise not to take advantage of that,” Lockhart says. “That’s an immediate return they can’t replicate.”

Most employers who offer an RRSP program also enable automatic contributions directly from your paycheque, saving you the annual headache come deadline time all while maximizing the benefits of compound interest. You can duplicate the automatic withdrawals on your own however if you’re not happy with the investment options available through your employer’s plan sponsor.

“The difficulty with many employer plans is that there is no advice,” Lockhart says. There’s also a good chance you’ll have to do some additional paperwork and pay a small fee if you decide to transfer your RRSP holdings if and when you change jobs.

Next you’ll have to decide how to invest your RRSP. Remember an RRSP is not an investment in and of itself, it’s simply a storage container for other investments with certain tax-saving characteristics.

You have to know your risk tolerance in order to make sound investment decisions, says Lockhart. Those approaching retirement should hold safer investments than young professionals with lots of time to recover from steep portfolio drops. Talk to a professional or take a self-evaluation to get a general sense of your tolerance level.

Once you’ve establish your risk tolerance, brush up the RRSP investments options available to you. “Someone who is just starting out has to extra due diligence,” Lockhart says. That’s because they typically have less money to invest so access to top-tier advice can be a challenge, especially at large institutions.

At a very minimum, first-time RRSP contributors should research active and passive investment strategies.

“If they do their research in those two areas, they are covering their bases,” Lockhart says.

For his own clients, Lockhart recommends a mix of investments that offer safety, income and opportunity for growth.

Once you’ve decided how to invest your money, it’s time to shop around for the best rates. You’ll want to check with discount brokerages, mutual fund companies and more traditional financial institutions. Investor Education Fund lists the types of fees you might run into.

Lockhart suggests kick-starting your RRSP with the money from your TFSA, if you have one. First-time contributors generally have large amounts of unused RRSP contribution. Find out what your RRSP deduction limit is and how much unused contribution room you’ve accumulated here. Your approximate RRSP-generated tax refund can be calculated here.

Once you’ve opened your RRSP continue to contribute to the TFSA, says Lockhart.

“I believe that it is possible to put too much money into an RRSP. I don’t believe that everybody should just maximize their contribution every year just because they can (unless they have incomes in the top marginal tax bracket).”

“If you are only paying 30% in tax, I question the value of the (RRSP-related) tax deduction at all.” In those cases it would be better to be in a TFSA since it’s more flexible and you’ll never pay tax on the gains.

Most people aren’t thinking about their annual RRSP contribution as an investment, says Lockhart. They are thinking about it as a tax break.

“The tax break is a factor, but it should not be the only factor and the weight given to it is unwarranted.”

Nearly nine in 10 college and university students have a credit card and 65% use it regularly making 12 purchases a month on average. What’s more, 80% of them pay off their balance—in full—every month, according to an annual survey for BMO. Pretty impressive, especially when you consider the wider population was carrying on average $3,556 in credit card debt in the second quarter, TransUnion Canada data shows.

It’s not surprising then that the majority of students polled don’t expect to have any credit card debt when they graduate. Talk about getting started on the right foot.

Pollara, a public opinion and research company, conducted the survey of more than 1,000 students on behalf of the bank and found only 6% use their cards to pay for school expenses, using their plastic instead to pay for discretionary items. Convenience, not lack of funds, it would seem are behind most of their credit card purchases. BMO did not ask students whether they’re paying off their credit card bills using money from student lines of credit though its not a behaviour the bank typically sees in its portfolio. Student lines of credit usually come with lower borrowing costs than credit cards.

“Students are doing their homework when they use credit cards. They clearly understand the wisdom behind treating them as payment vehicles—not borrowing instruments,” said BMO vice-president Su McVey in a press release.

The study also found that more young adults are using student discount programs and loyalty reward programs. Fifty-six per cent of students are using discount and rewards programs this year, up from 47% in 2011, the results show.

MoneySense recommends students who struggle to pay off their balances in full each month opt for a low-rate credit card charging between 4% and 9% interest, as oppose to the typical 19%, if they absolutely need a credit card. Students who pay off their bills regularly are ahead of their class and should consider a student card. We’ve ranked the best student credit cards with no annual fee and great perks such cash-back and discounts on clothing, movies and travel.

The Pollara online survey was completed between July 19 and July 26, 2012, with a sample of 1,018 post-secondary students. A probability sample of this size would yield results accurate to ± 3.1%, 19 times out of 20.

Imagine how good it will feel to wake up on Boxing Day without that all-too-common credit card bill hangover.

If you’re up to the challenge, let me know how you plan to sock away the extra $8 a day and I’ll publish the top strategies on this blog later this year.

In the meantime, I’ve asked around the office for some ideas that would either help save, or earn, the extra $56 a week for the next 13 weeks or so.

Here’s the best of the best to get you started.

From Jon Chevreau, Editor:

Raise your deductible. Call your car insurance provider and ask how much you’ll save by raising your deductible from let’s say $1,000 to $2,000. It many cases, the extra money in your pocket each month is worth having to fork over a little extra on the off-chance you’re involved in a collision. Click here for more on how to slash your insurance bill.

From Don Sutton, Managing Editor, MoneySense.ca:

Mix up your commute. Parking your car in an urban centre easily costs $8 a day, if not more. Walk, bike or take public transit when and where you can. Added bonus: you’ll save on gas and get squeeze in a little extra physical activity.

Make a music wish list. Skip the music downloads from now until the Holidays and jot down your must-haves instead. Someone is bound to ask you what you want for Christmas and when they do, you’ll be ready with a list of albums.

From Mark Brown, Managing Editor, Power of Advice:

Brew your own coffee. Walking past the coffee shop, even twice a week from now until Christmas, can easily save you $56.

Go gourmet at home. Forgo the fancy restaurant meal and tackle a new recipe instead. Heck, even grab your favourite wine from your local liquor store. Our bet is you’ll save $60 by doing so and there’s no corking fee!

Brown bag the leftovers. Again, we’re not suggesting meat loaf for lunch every day but packing your own lunch can easily net you $8 a day.

Cut the gym membership. Opt to exercise at home, especially if your last trip to the gym was sometime before Canada Day. If you really miss it, then you have your New Year’s resolution ready to go. (Here’s our guide to getting buff at home.)

Rent a movie. Need Friday night plans? Call some friends, pop some popcorn and hit up your local Redbox kiosk. Total cost: $2.50.

From David Hodges, Senior Editor:

Set up an automated account. Sock away extra cash with automated savings accounts available at most banks. Scotiabank has a dedicated Christmas Club that automatically pulls $20 or more from your account every week and pays 1% interest, maturing Oct. 31.

Sell your unloved goods. Scour your basements, sheds and junk drawers for valuable stuff you just don’t use. Garage sales not your thing? Post the items on eBay or Kijiji and watch the offers roll in.

Empty out your pockets. Now that you’ve been nickel-and-diming, throw all that extra change in a mason jar every night. When it’s full, take it to the nearest BMO Coin Counter and exchange it for cash. The service is free and the machines are available to everyone.

Clip coupons. Chances are countless coupons are delivered to your doorstep every week. Cut out the ones for products you use anyway and take them with you on your next trip to the supermarket.

…and last but not least from me, Editor, MoneySense.ca:

Give your thermostat a break. It’s one few times a year we Canadians can live comfortably without air conditioning or heat. Embrace it. Open the windows, grab a blanket, do whatever you need to cope with the outside temperature, naturally.

Time your laundry. Can you do laundry in non-peak energy consumption hours or hang your clothes out to dry? Doing so could save you a couple bucks on each utility bill for the next couple months.

Remember to share your $8-88 day challenge strategies by leaving a comment below.

Full-time post secondary students are often covered under their parent’s home insurance plan, according to John McClelland of Toronto-based McClelland Insurance brokerage. The key is double-checking with your provider and notifying them of the new address.

A simple phone call can protect students from all kinds of mishaps in and around campus.

“There’s the obvious— fire, water damage and theft—concerns but there are also liability concerns,” McClelland said.

If someone is injured on the premises or a toilet floods over and causes water damage to a few floors below, it can hugely expensive and time consuming without insurance.

Not every rental unit problem is the landlord’s responsibility either.

“There can be a lot of misconceptions out there,” McClelland said. “It depends who was found to be negligent. Tenants can be held responsible.” Without proper insurance, tenants who are found to be at-fault are on the hook for damages.

“Everyone who is on their own should have a tenant’s package and a lot of people don’t realize the importance of this,” McClelland said. A recent poll commissioned by TD Insurance found 47% of Canadian tenants under 35 do not have renter’s insurance and 32% incorrectly believe they are covered under their landlord’s insurance policy.

Tenant insurance is especially important for students because student housing can be more risky than single-family homes thanks to high turnover rates—not to mention the parties.

Protecting possessions from theft is reason enough to seek out coverage. Students may not have accumulated many material possessions but the stuff they do have is usually pretty valuable like laptops, TVs, textbooks and musical instruments.

Students who are covered under a parent’s plan should read the policy carefully to ensure there are no gaps in coverage.

“All companies have different wording on their habitational policies,” McClelland said.

For example, some companies only cover students staying in residence as opposed to just off-campus.

Others will limit student coverage to $10,000 in valuable regardless of the contents limit their parents enjoy.

“For a lot of students who are moving into residences that’s probably sufficient,” McClelland said. But tenants buying their own furniture to live in non-student housing might want to consider additional coverage.

Luckily, the average renter’s insurance plan is pretty reasonable, costing roughly $500 a year. Plus, tenant insurance can be bundled with car insurance for additional savings.

Tenant insurance can also help 20-somethings establish an insurance history that should help lower their insurance costs in the long run. A clean record can earn you free claims, loyalty discounts and lower deductibles on all types of insurance in the future.

There’s more for young scholars and their parents to consider when it comes to insurance. Living with a roommate that has insurance doesn’t mean you’re covered as well.

Students covered under their parent’s policy are typically subject to their parents’ deductible if and when a claim is made.

“In a lot of cases that’s going to be higher than a student might be comfortable with,” McClelland said.

And parents should keep in mind that any claims made by their child will affect their own claims history and could result in higher premiums.

“We’ve had some parents say, we know that they can be covered under our plan but we think it would be a good stepping stone toward responsibility but also protect our insurance if they had their own policy,” McClelland said.

It’s really about what you’re comfortable with and practicing preventative maintenance such as locking windows and doors while you’re out and even turning off the water if you’re away over the holidays to ensure the pipes don’t burst.

“Moving out of your parents’ home for the first time can be very liberating, but it also comes with a lot of financial responsibilities,” said Dave Minor, Vice President, TD Insurance.

“For those trying to make ends meet, tenants may be tempted to forgo renter’s insurance to try to cut costs. But consider the cost of replacing your laptop or smartphone if you were robbed. Before moving out, it’s important to understand the basics of renter’s insurance and ensure you have the right coverage in place to protect yourself.”

MoneySense went to Scott Hughes, principal of CapacityBuild Consulting Inc., to find out. Hughes helped structure the Centre for Social Innovation’s first community bond offering which raised more than $2 million to help buy and restore a downtown Toronto building. Known as the CSI Annex, the property is now a work and event space for a number of local community groups.

Community bonds are “a combination of financial and social returns” that satisfy investor appetite and the funding requirements of a specific cause, Hughes said. The interest-bearing bonds are intended for small scale, non-accredited investors and can only be issued by a non-profit organization.

How did CSI do it?

To raise $2 million, CSI sold a series of $10,000 bonds to investors paying 4% interest for five years, with interest calculated semi-annually and principal and interest paid upon maturity. If all goes well, investors can expect to get back roughly $12,190 after five years before tax.

Investors had the option of buying the bond directly from CSI or via a Self-Directed Registered Retirement Savings Plan (facilitated by Concentra Financial). Concentra Financial acted as administrator providing a liaison between CSI and investors who either committed new funds or reassigned existing funds to their SDRRSP for the bond. The SDRRSP route also provided investors the opportunity to generate an income tax deduction and there’s the added bonus of not having to worry about imputed interest creating additional tax liability.

………………………..Click to enlarge:

The bonds are mortgage-backed so if CSI reneges on its commitments, the property will be sold with bondholders getting a cut of the proceeds after all other lien-holders (like the bank and city) are paid off.

The bonds are mortgaged-back but not guaranteed. There’s a difference, Hughes said.

“There’s no guarantee, this is an investment like so many others.” The CSI bond has never been rated by a ratings agency.

As a non-profit, CSI is unable to record net income in back-to-back years. The plan is to pay the interest using money generated by their many leasing agreements among other revenue streams.

“There is a risk-return ratio at work in the investing world,” Hughes said. There’s little assurance beyond CSI running an acceptable operation, which they have done for many years, and the slight possibility of loss always remains.

The fact that the government backed the first mortgage on the property is reassuring, said Jason Heath, CFP and managing director at Objective Financial Planners Inc.

“It takes away a little of the concern about risk I might have as an investor.”

Heath called the CSI community bond “a happy medium” between financial and social returns.

“The interest rate that it’s paying is definitely below what market value would otherwise dictate,” he said. From a strictly financial standpoint, the market would’ve demanded more like 8% on those bonds.

“To a certain extent the investor is making a financial investment but they are also making a donation to the cause by way of the lower rate that they are accepting.”

Still, in today’s low interest rate environment with banks and government offering little more than 1% return on guaranteed investments, 4% is nothing to sneeze at.

For some investors, 4% interest is not worth the risk. For others, the social benefit alone is reason enough to have someone else hold onto their money. Somewhere in the middle, are those for whom the cocktail of investment returns plus social enrichment are just right.

“You never know what that perfect balance is until you take a product to market,” Hughes said.

CSI’s community bond may not have been the first of its kind in Canada (private schools and registered charities have traditionally offered bonds to their immediate communities) but it has captured the attention of other non-profits. CSI has since published a how-to guide on community bonds for similar organizations and Hughes is currently working on a white paper focused on community bonds in conjunction with Vancity credit union due out later this fall.

“There’s a lot of interest from non-profits but it’s still mostly conceptual,” he said.

Only a handful of Heath’s clients have expressed interest in socially responsible investments despite the vast array products on the market that promise to avoid alcohol, tobacco and weapons companies.

“Hopefully in time it will become something people are more conscious of,” Heath said, adding that community bonds are unlikely to get as much attention as “ethical funds” since advisers don’t get commissions or referral fees on community bonds and many institutions aren’t comfortable holding mortgages and private companies within RRSPs.

“It’s not likely the sort of thing that an investment adviser is going to get behind…it’s really upon the individual.”

Kia Byers, a five-time World Cup medalist and two-time national record holder for canoeing and kayaking, found herself at her career crossroads sooner than anticipated.

The 24-year-old Regina, Sask. native made paddling a priority her entire adult life, even though—in the back of her mind—she knew that eventually she’d need a post-sport career.

Last October, after 15 years of intensive training, Byers suffered a major back injury. The blow came just one day before she was supposed to fly to Guadalajara, Mexico to represent Team Canada at the Pan Am Games. Suddenly she needed a plan B.

“It wasn’t until I was injured and paddling was gone that I truly tried to figure out what that might be,” Byers said.

With her surgery scheduled for January and funding from Sport Canada about to run dry, Byers entertained at least seven different career options including law, political science, education and botany before finally settling on broadcasting.

“It was emotional, but it certainly made me stronger and showed me how to appreciate the opportunities that we’re given,” she said.

As a carded athlete, Byers was used to living on a tight budget.

“You have to budget because, living in Saskatchewan, it costs a lot to travel (to events). I could support myself, but it wasn’t enough to be able to live all on my own.”

Byers now plans to pursue a broadcasting career and competitive kayaking at the same time. Kick-starting two separate careers has forced Byers to get creative and stretch every dollar even further.

The University of Saskatchewan, where she’ll be attending in the fall, doesn’t have a kayak team so she’ll have to train on her own.

While in training, eating alone costs her roughly $100 per week.

Her coaching job at the Saskatchewan Canoe Club, a bursary from the Investors Group Amateur Athletes Fund and a tuition grant from Sport Canada has to be enough to cover both her schooling and her rehabilitation.

“The money I’m making now I’m not really spending, I’m hoping it will carry over to help me through.” She puts away roughly 10% from each paycheque and contributes only what she can to the mortgage that she shares with her fiancé.

“It has to be a conscious effort to try and save money because there is not a lot left over after all the regular life costs get paid for,” she said.

Byers may have been sidetracked by her injury but not stopped. If anything, it made her more determined as an amateur athlete and future broadcasting professional.

“I hope to return to full form in terms of kayaking and compete again for Team Canada,” she said. “When I hurt my back and paddling was not an option it made me realize that I need to work towards what I can do after sport a little bit harder.”