Desi Dialogues

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One of the few things that I did within the first year of coming to Canada was investing in a registered education saving plan (RESP) for my son.

The RESP is a great tool for newcomers and truly for all parents who want to invest in their child's future. However, we didn't think of investing in an RRSP (registered retirement savings plan) and that, say bankers, should be paid closer attention to as well.

The first priority for many newcomers to Canada is to make a make a new life. Day-to-day needs obviously take precedence over a retirement plan.

But financial planners suggest that no matter what the circumstances of the person, or the income level, investing even as little as $50 a month in an RRSP is a wise decision.

Since this is a special savings plan only available in Canada, many who come from Asia may not be familiar with RRSPs.

A RRSP allows a person to invest 18 per cent of last year's income (for 2007) to a maximum of $19,000 until one is 71.

Canadian Banks have ads in several papers touting the benefit of an RRSP - namely that money in an RRSP account is tax-sheltered and grows on compounded interest (interest earned on a RRSP plus any past interest is added to the principal).

Since money in an RRSP can be withdrawn to help finance first time homebuyers or finance yours or your spouse's education, this is beneficial to newcomers who want to, one day, own their own home. The limit is up to $20,000 each. For both instances, the government allows the person to repay or put back that amount in 20 years. As well, for some reason, if one has a low income in one year or needs money in an emergency then the government also lets you avail yourself of some money from the RRSP but that money will be taxed when one files returns.

Many believe that one can avail oneself of an RRSP account only in fixed GICs or fixed savings accounts, but planners say that isn't true and one can do it in stocks bonds or mutual funds.

Several banks, including Indian banks based here, have several funds available to invest back home. However, speaking to bank strategists here, markets in China or India - two favorites in the markets here - have to be viewed with some amount of caution. A leading strategist at a Canadian bank warns the prices for the stocks in India and China could be overpriced or inflated and hence investing there without any prior research into the fundamentals of the company should not be undertaken no matter if the media talks of a great economic climate.

And with the global market meltdown, last week the stock markets in India shaved off about 2,500 points, causing billions of dollars in losses to investors. Indian media has even reported some brokers ending up in hospitals with severe heart and stress problems.

But back to RRSP investing - many Canadian banks are using financial planners and even hiring staffs who speak several South Asian languages so that they can understand the needs of the community. A special emphasis to reach the South Asian audience is also on stream within these banks so one should try and take advantage of the services especially if one has a little change to spare.

With a heavily taxed nation such as Canada, any relief, even if it's small, can only help.