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rob carrick

Finance Minister Joe Oliver has your loot bag ready.

If you're a senior or a parent of young children, Tuesday's federal budget will cap off quite the party. The Family Tax Cut and an improved Universal Child Care Benefit have already been announced, as has an increased Child Care Expenses Deduction. It's expected the budget will in some way ease requirements that seniors withdraw a set minimum from their registered retirement income funds every year, and double the annual contribution limit for tax-free savings accounts.

This will be the government's last budget before the next federal election, so share-the-wealth measures such as these are natural. But in targeting certain groups, the government may be overlooking some useful things it can do to help the broader population.

Here, then, are three personal finance measures the government should take in this or future budgets (but probably won't):

1. Improve the RESP

Registered education savings plans were introduced by the federal government in 1972 and have been improved a few times since then. Now, it's time to do more to both encourage more use of RESPs by parents and grandparents, and increase the benefits to reflect rising tuition costs.

Under current rules, the federal government offers a matching 20-per-cent grant on contributions of up to $2,500 a child a year, with a lifetime maximum per child of $7,200. Additional grant money is available for lower-income families. One way to improve today's lacklustre level of RESP usage would be to offer a $500 per-child bonus grant when RESPs are set up for children no later than their second birthday. At a very reasonable 4.5-per-cent rate of return, that $500 becomes a little more than $1,000 in 16 years.

Another way to improve RESPs would be to add more grant money for contributions of up to $1,000 on an ongoing basis. That way, parents struggling to find money for their children's education get added incentive to at least put something in an RESP every year. One possibility would be a 50-per-cent grant on the first $1,000 and then the usual 20-per-cent grant on the rest.

2. Something for Gen Y

You'll notice that the personal finance measures announced already and currently in play for the budget are skewed to families with young children and seniors. Left out are young adults in their 20s and early 30s who are members of Generation Y, also known as millennials.

This is a group that is dealing with rising tuition costs and an unyielding job market that has popularized the unpaid internship while making career-building first jobs hard to find.

One approach to helping this group would be to lighten the income-tax load on people with lower incomes. A more targeted move would be to provide incentives to employers who create full-time positions for postsecondary graduates with benefits and employer contributions toward retirement saving, whether through a pension or group registered retirement savings plan.

Temporary work – short-term contracts or seasonal work – is on the rise for all workers, but it's particularly an issue for Gen Y.

What about a temporary worker's tax credit to help offset the extra costs of not being a member of an employee health benefit plan or pension plan?

3. Address mortgage penalties charged by the big banks

A few years ago, the government introduced measures to improve the transparency of mortgage penalties charged when a client breaks a mortgage before the maturity dates. That was helpful, but more needs to be done. It's now time to put a cap on the penalties themselves.

One mortgage broker's estimate is that 10 to 15 per cent of people break their mortgages and pay penalties. The right to charge these people a penalty for breaking a mortgage contract is not in question. The issue is in how the penalties are applied. Details can be found in this column I wrote more than a year ago, but the net effect is that bank mortgage penalties can be thousands of dollars more than those on comparable mortgages from alternative lenders.

The government got Visa and MasterCard to voluntarily agree to limit how much they charge retailers on credit-card transactions. Now, it's time to bring that same muscle to capping mortgage penalties. It's one thing to penalize clients, and another to turn those penalties into an indecently lucrative profit centre.