Welcome to the summer edition of Words on Wealth. In this issue we tackle financial education for teens. We believe this is essential learning for a generation that will face many complicated decisions regarding their wealth and finances. With an early start, our children will be well prepared.

Ever wonder how gross domestic product, interest rates and inflation impact our daily lives? Look inside to find out how important these terms really are. In this issue there’s also an estate planning article written exclusively for Meridian Members by one of Ontario’s leading estate specialists. And for Members who want their investments to generate an income, we dig a little deeper into the tax efficiency of Corporate Class Series T mutual funds†.

We hope you enjoy this edition of Words on Wealth.

If you’d like to receive an electronic version of this newsletter – or to read popular articles from previous issues – please visit meridiancu.ca/wordsonwealth.

Summertime and the reading is easy.

Hot Topics: A Members’ guide to the economic numbers we see every day

Investment Solutions: Introducing Corporate Class Series T Solutions

Financial Planning: Words on Wealth … for the next generation (Part I)

Expert’s Corner: Estate Planning: A “how to” for Meridian Members

In this issue

Words on WealthMeridian

NEWSLETTEr SuMMEr 2013

SuMMEr 2013

Words on Wealth2

HOT TOPICS

A Members’ guide to the economic numbers we see every day

The news – whether it’s via

the television, newspaper or

computer – often tells us what’s

happening in the economy

using words and figures that

can only be understood by an

economist. What the news

rarely tells us is what these

words mean and how they can

actually impact our daily lives.

We have compiled some of

the more oft-quoted economic

terms to show our Members

why they should care about

these terms.

GDP

“GDP” stands for gross

domestic product. GDP is a

number that helps economists

gauge the economic strength

of a country. By calculating how

much is being spent, produced

and exported (subtracting the

amount that is imported) by

a country over a certain time

period, economists and banks

are able to determine if the

country’s economy is growing

or contracting.

GDP information will be used

by the government to make

important economic decisions,

like where to set its interest rate.

Interest Rate

By decreasing or increasing

their interest rate (the amount

of interest they charge for

lending money to banks and

other large borrowers), central

banks – like the Bank of Canada

– can stimulate or hinder their

country’s economy.

In the case of companies,

lower interest rates mean

they can borrow money more

cheaply to invest in growing

their businesses. In the case

of individuals, lower interest

rates can mean it’s cheaper

for people to get a loan to

buy a car or a home, which

puts more cash into these

people’s wallets. This can

all help stimulate the

country’s economy.

Although a strong economy

is always the goal, there are

many reasons why excessively

stimulating an economy can

be quite negative for individuals,

including the main reason,

which is inflation.

Inflation

When a country’s economy is

stimulated, its GDP figure will

generally start to rise, which

is usually deemed positive.

That said, a strong economy

often results in inflation, which

is gauged by a country’s

Consumer Price Index (CPI)

figure. Inflation is simply a rise

in the prices paid for goods

and services.

While inflation is a fact of life and

part of a healthy economy (we

all know what a quarter bought

our grandfathers 70 years ago),

inflation can have a negative

impact on the purchasing

power of an individual’s money

… and their retirement income.

Luckily, there are investment

strategies that Meridian

Members can use to overcome

this issue.

To learn more about how these

(or other) economic terms may

impact your finances, please

contact me today.

SuMMEr 2013

Words on Wealth 3

BENEFIT 1: Tax-efficient income

Corporate Class Series T solutions give you the

opportunity to keep more of your monthly cash flow

by reducing the taxes you pay on this cash flow. How

is this possible? Corporate Class Series T solutions

typically pay out all or a portion of your cash flow in

the form of “return of capital,” which is not taxable

because it is simply a return of your principal.

Example #1: How much do you need to reach your income goal?*

Interest-paying

investment

Dividend-paying

investment

Investment in corporate class funds (Series T6)

Amount that you invest $500,000 $500,000 $500,000

Monthly after-tax income you want $2,500 $2,500 $2,500

Monthly pre-tax cash income that your investment must produce

$4,655 $3,548 $2,500

Required rate of return 11.20% 8.52% 6.00%

By paying out distributions in the form of return of

capital, Corporate Class Series T funds have the

potential to deliver tax-efficient growth and income

in your non-registered investment plans.

Are you interested in an investment solution that can help you generate more after-tax income

or grow your investments in a more tax-efficient manner? If you hold investments outside of a

retirement Savings Plan (rSP), registered Education Savings Plan (rESP) or Tax-free Savings

Account (TFSA), Corporate Class Series T may be just what you’re looking for.

INVESTMENT SOLuTIONS

Introducing Corporate Class Series T Solutions†

An effective way to get tax-efficient monthly income

* Source: Mackenzie Financial (12/12)

BENEFIT 2: Tax-efficient growth

The annual rate of withdrawal from a retirement

portfolio can dramatically affect how long a portfolio

will last. It’s a delicate balance between withdrawing

the appropriate amount needed to maintain the

required standard of living versus withdrawing too

much and raising the danger that the portfolio will

not last long enough.

Example #2: The less tax you pay the more your investments may grow.*

Let’s look at the example below. When your original

capital has been fully returned to you tax free, the

remaining amount left in the portfolio will

predominantly be capital gains, which are more tax

friendly (when compared to interest income or dividends).

Assumptions: Growth of $100,000 invested for 25 years in three different investments, each providing a 6% annual rate of return, compounded monthly. The investment in corporate class funds generates gains that are tax-deferred until the end of the 25-year period, then taxed as capital gains at an effective rate of 22%. The dividend-paying investment is taxed annually at 23%. The interest-paying investment is taxed annually at 44%.

Years from today0 5 10 15 20 25

$100,000

$200,000

$300,000

$400,000

$500,000

$366,092 Investment in corporate class funds

$289,652 Dividend-paying investment

$225,458 Interest-paying investment

The sawtooth pattern results from the tax you payevery year, which hinders investment growth

Your gains are taxed whenyou redeem as capital gains

As a Credential Asset Management Inc. Mutual Funds Investment Specialist, I can help you learn more about Corporate Class Series T Solutions† and whether they are right for your portfolio. Please contact me to make an appointment or if you have any questions.

SuMMEr 2013

Words on Wealth

LEssoN 1

Value of money

It is hard to fully comprehend

the value of money until we

start earning it for ourselves.

As soon as teens start making

money – from babysitting, yard

work or even a part-time job –

you can help them understand

that a salary represents their

time and skills. Show them how

to read a paycheque, calculate

how many hours they worked

and make sure they are being

appropriately compensated.

4

FINANCIAL PLANNING

Words on wealth … for the next generation

How much do 16- to 18-year-olds know about personal

finance? Not enough.

Nearly 70% of teens polled in a recent American

survey (and there’s no reason to think their Canadian

counterparts are any different) admitted they do not

understand how credit card interest and fees work.

The same percentage of those surveyed do not know

what a credit score is, and more than three-quarters

do not understand how income taxes work. Teens

receive the bulk of their financial knowledge (82%) from

their parents, and they want to know more.1

Young people are going to turn to you for financial

guidance, but fear not. You can share your hard-won

financial knowledge and expertise with the young

people in your life. The following are some easy lessons

you can use to get the conversation started.

Part I: Introduce your teens to personal finance

LEssoN 2

Truth about debt

used correctly, credit cards

are a convenient way to shop

online (more than four million

teen-age girls made online

purchases in 20112), while

building a healthy credit rating.

Consider helping your teen

apply for a low-limit credit card.

read the application’s fine

print together (applications

must be co-signed by an adult

1

2

SuMMEr 2013

Words on Wealth

if the applicant is under 18).

Make sure teens understand

the payment due date and

the interest rate that will be

charged if they don’t pay the

balance in full each month.

LEssoN 3

Sweat the

small stuff

Help teens make the important

connection between what

they earn and what they can

afford by suggesting they

track their spending over one

month (it’s easy with a smart-

phone app). You can make this

a family project by tracking your

own spending and comparing

the two at end of the month to

get the conversation started.

Watching small purchases

($5 for a hot drink + $20 for a

gift + $15 for a movie) add up

to big spending is an excellent

lesson in financial awareness

and the first step on the road

to financial responsibility.

Help set some goals and

construct a plan. Ask teens

5

3

to write down small (clothes),

medium (technology) and

large (car or education)

savings goals. Set up an

achievable plan, put it in

writing and check in

periodically to see how

they are doing. Celebrate

milestones together, and

help them stay on track.

Saving is one of the

most important financial

concepts you can teach

the next generation.

Ask them to consider

putting aside some money

for long-term savings,

and discuss the different

savings account, investment

and interest-rate options

available. Concrete examples

showing how their money

can grow will inspire any

young financier.

Give the teens in your

life the benefit of your

financial experience and

you will prepare them for

a lifetime of manageable

debt, healthy savings and

financial responsibility.

“ Words on Wealth … for the next generation” will

continue in the

next issue as we

look at financial

education tips for

6- to 12-year-olds.

1 Source: “2011 Teens & Money Survey Findings: Insights into money attitudes, behaviors and expectations of 16- to 18-year-olds”, Charles Schwab

2 Source: www.emarketer.com

Please contact me for more ideas on helping your children, nephews, nieces, or grandchildren grow their financial responsibility.

SuMMEr 2013

Words on Wealth6

EXPErT’S COrNEr

Estate planning: A “how to” for Meridian MembersOffering plenty of advantages for business and farm owners

Woody Allen once said “I don't

believe in life after death, but

just in case I'll bring along

a change of underwear.”

Humorously, he underscored

the need to be prepared. It

seems to be a remarkable trait

of human nature, however,

that while all people should

make a Will, these important

documents are often

postponed.

Have you started your estate plan yet?

Don’t let the term “estate plan”

intimidate you. Estate plans are

not just for the rich. Almost all

of us have estates. Our estates

include all that we own – even if it

is only a baseball card collection.

An estate plan can help

reduce taxes and other fees,

so that more of your estate

goes to the people you love.

To get started, you can speak

with your Meridian Wealth

Advisor who can bring an

estate-planning team, including

an accountant and lawyer,

to help you along. until then,

here is some important estate

planning advice you may want

to keep in mind.

For your first meeting with your

estate-planning team, bring

along a list of all your assets –

including your stocks, bonds,

bank accounts, real estate,

automobiles, life insurance

policies, title documents for real

estate and any specialty items

(such as art or coin collections).

You will also need a list of

liabilities – including mortgages,

credit card debt and loans.

Bring any previous estate

planning documents, such as

Wills and Powers of Attorney.

But remember, you can start

the estate planning process

without having all this information.

It is important when developing

your estate plan to make sure

it suits your special needs.

You should not base an estate

plan on just saving taxes or

expanding your wealth – you

should build it to deal with your

needs, as well as the needs of

your loved ones, before you pass

away or become incapacitated.

Barry Seltzer

Barry Seltzer has

practiced law for over

three decades in

Toronto in his preferred

areas of estate planning,

estate administration,

business succession

planning and elder law.

A frequent television and

radio guest in Canada,

the U.S., the U.K. and

Australia, Barry has also

co-authored several

books, produced an

audio series and

lectured at many

colleges, universities

and institutions.

SuMMEr 2013

Words on Wealth7

EXPErT’S COrNEr

Farmer-specific estate issues

There are some issues and

concerns that are unique to

the business of farming. First is

finding the best way to transition

the business and farm property

– either to the next generation

or its eventual sale.

Second is the issue of animals

– be they livestock, horses or

even pets. It’s important to put

specific instructions in a Will

regarding animals because

without a complete estate plan,

their future may be uncertain.

In some more extreme cases,

animal owners have included

clauses in their Wills asking that

their animals be destroyed upon

their death, as they think their

animals could end up in the

wrong hands. This, however, is

rarely allowed by a court.

It’s true: a proper estate plan

will take some time to set up

and you may face a few difficult

issues. However, there is no

better way to ensure your assets

will end up in the hands of the

right people than having a robust

and up-to-date estate plan.

To get started on your Will

and estate plan, please contact

me today.

Five key reasons for having a Will

A Will gives you the opportunity to do things that would not be possible if you die without one. With a Will, you are able to:

1. Choose who will manage your estate

2. Give directions as to what will happen to your assets

3. Choose your beneficiaries

4. Securely leave property to minors

5. Save administration expenses

SuMMEr 2013

™Trademarks of Meridian Credit union Limited. 06/13

meridiancu.ca

It means: Trust. Advice. Planning.

As your trusted Meridian Wealth Advisor, I take the time to build a strong relationship for the long term, as well as to understand your unique needs. My goal is to translate where you want to go into an effective and achievable road map, and to find the right investment solutions to help you save, protect and grow your financial assets.

Here is how I look forward to building our relationship and your trust:

✔ I provide an unbiased, honest perspective, and my decisions are based only on your best interests. I have no preference toward any particular solution apart from the one that most effectively helps you meet your objectives.

✔ I ensure you clearly understand your wealth planning options and align your portfolio with the right solutions to help you reach your goals. We will review your finances together on a regular basis, and I will keep you well informed so you always feel knowledgeable and comfortable.

As a Meridian Wealth Advisor and your neighbour, I am committed to working with you to create and build the right approach for your family’s financial security that is tailored to your needs, your objectives and your values.

WHY MErIDIAN WEALTH?

† Mutual funds are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

What does wealth management mean at Meridian?

Words to Ponder

“A clear vision, backed

by definite plans, gives

you a tremendous

feeling of confidence

and personal power.” Brian Tracey