Young Jewish professionals who are struggling to make ends meet and provide for their growing families also face challenges their parents’ didn’t have to contend with.
In major Canadian cities such as Toronto and Vancouver, home ownership is becoming less and less attainable, as the average cost of a home increases at a dizzying pace.
Trying to achieve the dream of home ownership – with or without financial help from their parents – is enough of a burden without factoring in the need to save for their children’s education and their own retirement.
Add to that the cost of Jewish obligations such as Hebrew day school tuition, synagogue membership fees and even keeping kosher, and it’s enough to make a person throw their hands up in defeat.
But Paul Engel, a 33-year-old financial planner, says there’s no need to panic. Instead, make a plan.
Engel recently bought a home in Bathurst Manor, a Toronto neighbourhood with a large Jewish population where homes are in high demand and the average price is about $900,000.
He said it was important to him and his wife to settle down in a Jewish area, and they paid a premium to do that.
“When I was growing up in Richmond Hill, my street was 90 per cent Jewish… I didn’t go to the Jewish schools… but I always felt that I needed to get the Judaism back in my life,” he said, adding that he keeps a kosher home, and he and his wife are members of two synagogues.
Engel said he’s worked with many Jewish clients who have felt forced to dip into their line of credit in order to meet Jewish obligations such as day school tuition.
“You’ll see a lot of that going on. If you take a look at almost every single family, everyone is either dipping into a line of credit or is heavily mortgaged if they don’t have their parents’ help.”
Andrea Benaim, a 35-year-old chartered accountant and mother of three children ages four and under, talked about some of the expenses associated with being an active member of the Jewish community and ways families can plan for the future, even when money is tight.
“It’s not fair that if you want to send your kids to Jewish school, they expect you to go almost broke in the process. With respect to that, don’t be afraid to ask the schools for help. I think that’s a big thing,” she said. “At least approach them and talk to them about it, and see what the options are.”
Benaim said she was against Jewish day school because of the cost.
“I could not understand why people sent their kids to Jewish school,” she said, adding that she and her husband began arguing when they were dating about whether Jewish day school should be a priority.
“[We] found a way and figured it out… When I think about it, I’m happy we were pushed to… send [my daughter to day school]. It means that we cut back on our own personal things – we don’t go out together as much, we don’t go for dinner as much – but we’re happy with the school, and I don’t regret it at all. If the money is going toward something you feel that you’re benefiting from it and the family is benefiting then it is worth it.”
Another Jewish obligation that can hurt the bottom line is keeping kosher, Benaim said.
“I didn’t grow up kosher, so now that we have a big family and a nanny, buying everything kosher is [an added expense].”
Last March, The CJN reported that the price of kosher feta cheese had increased from $6 a pound to $10 a pound over the course of two years, and a package of ground meat jumped from about $10 to $13 over the span of a few months.
“We work [food expenses] into the budget of monthly expenses. We kind of stick to it… When we see we’re going broke, we see we have to work a lot harder,” she said with a laugh.
But, Benaim added, families shouldn’t feel the need to abandon Jewish obligations that are important to them because of cost.
“Don’t stop doing things that are super important. Come up with a budget. It can be on Excel or it can be on a piece of paper – whatever you’re comfortable with. But you can just keep reworking the numbers so you can manage to fit that in there somehow.”
Howard Halpern, a chartered professional accountant and certified financial planner who has three adult sons, also touts the benefits of sticking to a budget.
“I strongly recommend that a review of family expenditures take place. I sit down with clients and look at their monthly spending by credit card, pre-authorized debits, or their chequebook, and we look at what expenses can be eliminated,” Halpern said.
Engel said that before you budget, it’s important to build a long-term plan.
“Clarity is everything. If you don’t know where you’re going and you don’t know how you’re going to get there, you’re never going to get anywhere,” Engel said.
“Once you’ve identified the goals and what you want to do, we can start figuring out how to save. Unless I know what you’re aiming for, I’ll never know how to get the plan in place to get you there. Dream big, because the bigger your dreams, the harder you’re going to work to get there.”
Arming yourself with knowledge and surrounding yourself with professionals are both equally important, he said.
“Have a trusted adviser for everything. Sit down and talk to somebody. It’s always important to get as much information as humanly possible before you decide what you’re doing. A more educated buyer or investor is going to have an easier time achieving goals, because they’ll understand the way everything works and it will be easier to buy into the plan.”
Halpern’s plan to achieve financial security starts with tax minimization strategies.
“Being a tax expert, [I advise that] you really want to have a thorough review done with regard to your income tax return preparation and planning. A lot of people are preparing taxes themselves using cheap software, and it gives them an artificial level of comfort that everything is great, but it’s total BS. It’s really important that they have a professional do a review,” he said.
“The government only gives you up to 10 years to correct any errors, any deductions, that have been made.”
As a CPA, he said he often sees his clients making mistakes. For example, when people work for an employer they think that can’t deduct anything.
If they qualify, they can obtain a form from their employer called a T2200 – declaration of employment conditions.
“It’s kind of like a passport, if you will, to claim certain eligible deductions, such as a cellphone and automobile expenses,” Halpern explained.
“A lot of clients I have only go into the office once or twice a week, and the rest of the time they work at home, so they can also claim a home office… This could be a huge windfall of tax savings.”
He said there are also countless people who never considered that one of their children, their spouse or they themselves might qualify for a disability.
“There are pretty complicated rules associated with it, but take celiac disease, for example. Many people suffer from celiac disease today, and they don’t really know that it might qualify as a disability under the tax guidelines. If that’s the case, it could be worth a huge amount of money every single year.”
He said if a child qualifies for the disability tax credit, it could increase the Canada Child Benefit that parents with children under the age of 18 receive each month.
In addition to taking advantage of tax credits, Engel said planning for a financially secure future includes preparing for the “what ifs” that can affect your lifestyle.
“What if I get sick? What happens if I get hurt? What happens to my family if I pass away? I’ve been touched by insurance twice in my life. My dad battled cancer and had a disability, and because of policies that were put in place, we had the money to survive. Thank God for that, because if not, I don’t know where we would be today as a family,” Engel said.
“That is the biggest thing, because our generation can’t afford to buy those policy premiums anymore. They can’t afford to do the things we need to do, and that is a big thing we have to talk about, because if you can’t afford to put the right coverage in place, and you know your parents can’t afford to help you, what do you do when the worst happens?”
Halpern agreed that it is a problem that many young families don’t have the disposable income they need to buy insurance, “but when you’re younger, that is a good time to get insurance, as opposed to when you’re older and have health issues,” because it may be harder to qualify or could be more expensive.
Each of the experts agreed that the most important aspect of planning for the future is the most obvious and most important one: putting aside money each month for savings.
Benaim said she puts money toward her kids’ registered education savings plans (RESP) every month.
“You don’t get a tax deduction for that, but when the kids take it out, they don’t get taxed on it either. The government gives you a huge return on your investment. The government will match it up to $500 a year. Any extra money I have – even if I get a birthday gift for the kids and I get $40 – I’ll put that money into their RESPs.
She said if she maxes out on how much she can contribute to the RESPs, she’ll contribute to her tax-free savings accounts (TFSA). “You can’t have a tax free savings account until you’re 18, but I have four TFSAs – my own personal one, and then one for each of my kids.”
Benaim insisted that saving at least 10 per cent of your income each year is the key to securing financial freedom in the future.
“Have it come automatically out of your bank account. That peace of mind helps me sleep better at night knowing that I’m doing that. Maybe now my cash flow is a bit tighter and I can’t buy that pair of shoes, but you’re investing it now, so it’s going to build over time. It might be worth a dollar today, but who knows what it’s going to be worth in 18 years?”
Engel said the concept of paying yourself first is his essential.
“You always pay every other bill to everyone else, but yet we don’t take the time to put money in investments such as RRSPs or TFSAs, and by delaying putting that money aside, we’re affecting the growth that could be happening,” he said.
“Make sure that you have a three-month savings cushion set aside in case you become disabled. Have the right coverage in place. It doesn’t have to be the best coverage, but it should be something. Never rely on your group benefits plan, because the job of those short-term disability plans is to give you the least amount of money possible for the shortest period of time and get you working as soon as possible.”
Engel said he’s flexible with his clients if they opt to defer saving for the future in lieu of a short-term goal, like saving for a down payment on a house.
“If we were to say to those people that for the next five years that my RRSPs and TFSAs aren’t so important… because ‘I’m saving to buy a bigger house, I’m saving to pay for Jewish school,’ we can have that conversation, but it doesn’t mean I’m not going to come back to you in five years and say, ‘It’s time to start thinking about the future.’”