Grandparents, in their children’s eyes, can be a source of frustration. Not because they do not love their grandchildren but because of the way they express it in a material sense. Grandparents tend to buy too many things that are not age appropriate, too expensive or items that do not reflect the parent’s sense of value; even though the parent likely established their values based on the influence of ‘their’ parents.
It is also true that a great number of grandparents give money for birthdays, or other holidays. So how can a grandparent stay in the good graces of both their kids and grandkids? In a word; ‘education’.
Giving the Gift of Knowledge
Most of the last few generations focused on keeping a roof over their family’s head and providing food and clothing. There was little left for ‘luxuries’ and if there was, those luxuries came in the form of hockey registration and equipment (upgraded year after year), dance lessons or musical instruments.
Now that baby-boomers have reached retirement age, there is much more time on their hands and more disposable income from life-long savings and pensions. Many grandparents are turning their focus to providing their grandchildren with whatever advantages were not necessarily available for their own kids. One prominent choice of giving a gift that helps the grandchild and keeps their own children happy is an RESP (Registered Education Savings Plan).
RESP Start-up is Easy
The best time to start an RESP is the moment your grandchild is issued a Social Insurance Number (SIN). Some reasons for choosing an RESP as a gift are:
Tuition and living expenses for the first year of post-secondary education are comparable to buying a new compact car.
You can contribute up to $2500.00 per year, per child and the federal government will grant $500.00 each year or 20 per cent.
Unlike a TFSA (Tax-Free Savings Account), the RESP can only be withdrawn with proof of your grandchildren’s admittance to an authorized post-secondary institution. A TFSA is usually liquid and funds can be withdrawn for any purpose.
Tax is only payable on an RESP when the funds are withdrawn and are based on the ‘student’ who normally carries a lesser tax bracket.
You can contribute up to $50,000.00 for each grandchild. Adding the government’s contribution and the strategy of investing the RESP funds can pay for up to 2 or 3 years of tuition and living expenses.
So What about the Presents?
Every grandparent wants to celebrate a birthday or holiday with a gift that brings out the joy on their grandchild’s face and the light in their eyes. Keep in mind though, that if you did not ‘spoil’ your kids, the chances are good that your grandchildren will not feel spoiled.
One suggestion is to cut the budget for material gifts; but when they are old enough, include an envelope in a small gift that shows them their educational fortune. Your grandkids may not understand it at younger age, but eventually they will come to appreciate ‘the gift’ as a post-secondary student aspiring to make their mark in the world.
Mutual funds and segregated funds provided by the fund companies are offered through Worldsource Financial Management Inc., sponsoring mutual fund dealer. All other products and related services are offered through Brian Fitzsimons/Fitzsimons Financial.