Jordan and Crystal just had their second child, Brandon (4 months old). He was born with Down
Question:
Jordan and Crystal just had their second child, Brandon (4 months old). He was born with Down syndrome and will require additional supports throughout his lifetime. They would like to ensure that Brandon will be financial stable for his lifetime and would like to start saving for his future now, setting aside $1,500 a year. Their first child Erica is now 3 years old. She has shown a lot of interest in animals and Jordan and Crystal think she will become a veterinarian. They would like to save $50,000 for her schooling by the time she is 16.
Jordan earns a reasonable salary but has no benefits provided through his employer. Crystal also has a good job, but again, no benefits. They rent a house at the moment and are looking to buy a home for themselves up in Tottenham where Crystal’s family is so that they can help with the kids. They are first time home buyers. They would like to save $100,000 for a down payment on the home in 3 years.
Since both Jordan and Crystal do not have any benefits provided through their employers and will be buying a house in the near future they want to ensure that their budget will allow it and that in case of any unforeseen events they will be able to finance their expenses in the short to mid-term. They have heard that 3-6 months’ worth of their take home pay would be reasonable to save. This amounts to approximately $60,000. They are also considering their retirement and want to be sure that they will have some money set aside for this in 20 years since they will only have government pensions. They do not know how much they will need but they do want to start making small contributions for this goal annually.
They currently have the following financial assets:
Account | Amount |
Savings Account | $ 6,200 |
Chequing Account | $ 1,500 |
Crystal's TFSA | $ 36,150 |
Jordan's TFSA | $ 22,195 |
Crystal’s RRSP | $ 17,836 |
Jordan's RRSP | $ 45,226 |
RESP for Erica | $ 4,200 |
They have a monthly surplus of $3,500 that they can use to save for their goals and they have the following portfolios to choose from for investing:
Conservative | 100% fixed income |
Income Focused | 70% fixed income / 30% equity |
Balanced | 40% fixed income / 60% equity |
Growth | 20% fixed income / 80% equity |
Aggressive | 100% equity |
Required:
For each of their five goals:
a) Identify the type of account you suggest they use (non-registered, TFSA, RRSP, RESP, RDSP) and why this would be the most suitable. (15 marks)
b) Select a suitable portfolio for each goal and explain why this is appropriate. (10 marks)
Operations Management Creating Value Along the Supply Chain
ISBN: 978-1118301173
1st Canadian Edition
Authors: Roberta S. Russell, Bernard W. Taylor, Ignacio Castillo, Navneet Vidyarthi