Millennial Parents’ Guide to Financial Planning for Children: By Michael Lampel
I’ve spoken with many grandparents who are looking to help save for their grandchildren’s education. After all, education is expensive and this is only going to continue to be the case. By the year 2031, the cost of education is expected to rise to $150,000 if the child is living away from home. And yet, the lifetime limit on the amounts that can be contributed to all RESPs for a beneficiary is $50,000.
I can definitely relate to the desire to help cover this cost. But whenever I offer to help my kids cover the costs of education for their children, I can see they feel embarrassed.
“Don’t worry, we can manage,” they tell me.
But I can also see how stretched they are financially, and I’m concerned they won’t be able to set aside the needed funds for my grandchildren’s education. We’ve discussed the possibility of me helping them contribute to my grandchildren’s RESP, but due to the annual limits on contributions and who can open the RESP, as well as many other rules on ownership, it quickly became very complicated. So I settled for offering cash gifts to my kids and more gifts for my grandchildren for birthdays and holidays. And yet, it often feels like I’m just wasting my money and my grandchildren’s time.
When I meet with grandparents this story is very typical. Their generation understands the value of education and money. They want to do something now, while they’re alive and well. They want to see the fruits of their efforts and not simply wait until they’re gone to leave a gift behind.
Considering the average age of a grandparent today is 64, and they’re going to live another 30 years, they are often frustrated when they learn their grandchildren won’t benefit from any of their help with education today.
When we educate families on Child Plan for grandchildren they have one question: Why didn’t we know this was around? Child Plan is the fastest growing alternative to the RESP and the only tax-free gift both parents and grandparents can open for their (grand)children. From the day the plan is opened, your child or grandchild will receive a tax-free annual dividend for life, which can be used towards any school or education program around the world and any other financial need in life.
I’ve met with many parents who actually bring their own parents to the meeting to learn how they can pay for rising education costs together. One of the features grandparents really enjoy is the ability to open a Child Plan for each grandchild, fund it, own it, and eventually — when they’re ready to transfer it — gift it to each grandchild to help pay for their education, completely tax-free.
Grandparents are especially pleased to know they can set up each grandchild’s parent as the backup owner of their child’s Child Plan. Should something happen to them, the Child Plan will be passed over, completely tax-free, to the parents to hold in trust.
The funny part is, whenever we meet with grandparents and educate them on Child Plan participating whole life insurance, they tell us they know the plan well because their parents opened the very same plans for them in the 1950s or ‘60s. They tell us they’ve received annual dividends each year since their parents opened a plan for them. This is because Child Plan participating whole life insurance plans have actually been used by Canadian families as a safe, long-term way to save for their children’s education and future for over 100 years.
Sometimes, what’s old is new again.
To learn more about Child Plan for grandchildren, please get in touch with us. We’re happy to answer your questions.
Child Plan™ is Canada’s fastest growing alternative to RESP. It’s a secure and flexible way to invest in your child’s future.