JUN 2021

When building a house, you start with a solid foundation before you start framing the structure. Below are two ways your child’s (grandchild’s) financial foundation can be set up for success.

A Registered Education Savings Plan (RESP) can be part of every family’s financial plan. The Government will contribute 20% of your contributions up to $500/year. You contribute $2,500 and $3,000 is invested in a tax-deferred account. A 20% rate of return before the funds are even invested. A $7,200cap on government contributions up until your child turns 18. You can contribute up to$50,000 per child and have 35 years to use the funds. When your child goes to post-secondary school the income received is taxed in their hands.

One minor drawback, if your child does not attend a qualified post-secondary institution and you want to close out the account all grants received and any investment growth those funds received are returned to the government.

Your contributions are not taxed, however any investment growth earned on those funds is considered interest income and is taxed accordingly. This is the first way of building your child's financial foundation. The second way would be to purchase Permanent Life Insurance Purchasing a cash value life insurance policy also has a tax deferred investment account built into the plans structure.

While there is no government grant, there is also no $50,000 lifetime contribution limit or restriction on what the funds can be used for. Also, your child now has the added benefit of being insured no matter their health, occupation, or hazardous hobbies they take on in the future. This factor is often overlooked until too late for some. Giving the gift of guaranteed insurability is priceless.