Instead of buying expensive gifts, smart grandparents make investments to secure their grandchild’s future. By their age and experience, every grandparent knows that investing in their grandchild’s future is the best financial gift.
According to official statistics, saving for a child’s post-secondary education is the need of the hour. In addition, there is a continuous rise in post-secondary education fees and inflation rates. Thus, the earlier you start saving for your grandchildren, the more they can accomplish in their future.
There is a spectrum of choices in Canada when it comes to financial gifts. Although the Government of Canada has specific programs like RESP for a Child’s post-secondary education, these plans do not suffice the modern-day requirements. Therefore, more and more parents or grandparents have started to trust more flexible Child Plans. Click here to read more about Child Plan for grandchildren.
We have listed some best financial gifts you can give to your grandchild to make things more simple.
Benefits of a financial gift for your grandchild
Financial gifts are a great way to take off some of the future financial burdens from your grandchild’s lives. Here are some top benefits of a financial gift for your grandchildren.
- Secures your grandchild’s post-secondary education
Nowadays, post-secondary education costs are sky-high. It will get more expensive with every passing year. This means that the grandparents who wish for their child’s higher education need to invest at the earliest to prevent them from a debt burden. Child Savings options like RESP and Child Plan are the easiest way to start saving for your grandchild’s Post-secondary education.
- Helps your grandchild financially
The sole aim of a financial gift is to secure a child’s future. The most common drawback of Government-sponsored programs is that they are program-specific. For instance, your savings in an RESP account will be utilized fully if your child pursues post-secondary education. The same is the case with other plans.
This is why more and more people in Canada are looking for an alternative to the RESP plan like the Child Plan. Through this, you can not only secure the educational future but fund their other financial needs in the future, such as:
- Fund their first startup
- Down payment for your grandchild’s first home
- Any different financial markets in their future
- Covers your grandchild’s life
Flexible plans such as Child Plan cover the post-secondary education of your grandchild and protect their life. Hence, the permanent, fully paid-up life insurance values grow throughout the plan from the very first day of opening.
Child Plan “Participating” Whole Life insurance plan combines:
- Tax-free annual dividends
- Guaranteed cash values
- Permanent whole life insurance for future generations
Life insurance values are paid to future generations tax-free.
The best financial gifts for your grandchild
Some of the best opportunities to save for your grandchild’s post-secondary education are:
- Open Registered Education Savings Plan (RESP)
The Canadian Government sponsored a Registered Education Savings Plan (RESPs) that allows parents, grandparents, or guardians to save for their child’s post-secondary education. The main advantages of this program are:
- Government Matching Contribution – Through Canada Education Savings Grants (CESGs), the Government matches 20% of the contribution made to the RESP by you with a maximum limit of $500 per year.
- Tax-free money growth – Any contribution and grant added to an RESP account grows tax-free. However, the tax will be charged when your child starts withdrawing money from the RESP account for post-secondary educational expenses.
While multiple RESP accounts are allowed for a child, the combined contribution from all RESP accounts should not exceed $50,000 per child.
- High-interest Saving account and TFSA
If you want complete control over your savings, consider opening a high-interest saving account or Tax-Free Savings account (TFSA) for your grandchild. All contributions, dividends, and interests grow tax-free in a TFSA. Similarly, a high-interest savings account helps in maximum growth of your savings compared to a regular savings account.
However, it is crucial to define the ownership and terms of such savings accounts to avoid any disputes in the future.
- Life insurance
Life insurance not only covers the life of an insurer, but the insurer can utilize the cash value in many ways, such as:
- The annual cash dividend can be used to meet higher education expenses.
- You can use the cash value as collateral to borrow money.
- Lastly, an insurer can exit the policy and use the cash value.
The future is unpredictable. Life insurance in place helps the kin of the insurer to meet all financial obligations after the insurer’s death.
- Child plan for grandchildren
A Child Plan for grandchildren is the best option for those who want all the benefits of RESP along with more control over their funds. In addition to funding your child’s post-secondary education, this plan covers any future financial needs. Both parent and child get endless benefits, such as:
- Tax-free growth from day one of opening an account
- The funds can be utilized for a child’s higher education anywhere, down payment for a first home, or to fund their first startup
- Regular tax-free dividends per year for life
- Quickly transfer the accumulated funds tax-free to your child anytime after they turn 18
- It is a “participating” whole life insurance plan, which means it also covers the life of your child
- Real estate
Real estate is a lucrative and advantageous industry when traded cautiously. It would be best to go through extensive market research before making investments. But, if you can afford to buy property in your grandchild’s name, it is one of the best saving strategies.
It would fulfil different financial requirements like medical expenses and building a future asset for your grandchild.
Endnote
Undoubtedly, regular savings is the key to helping your grandchild achieve their goals. While a traditional savings plan like RESP for a child’s post-secondary education is a sensible option, it faces several limitations and challenges. Here comes the importance of more flexible plans like the Child Plan. This plan is tailor-made to serve every future financial need of a child.
Perhaps the final decision rests on personal goals and budget, do not hesitate to compare and do research.
