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A Worthwhile Legacy
By Douglas Chalke, Sunrise Family Services Society
By Bob Lewis, as printed in the Spring 2007 issue of Island Child
Q: I am a grandparent and I have a problem. My grandchildren have so many toys, so many clothes, so much “stuff”, that I have been at a loss to find another worthwhile gift for their next birthday.
A: Most grandparents have this dilemma. And I am also not alone in feeling concern over the financial difficulties that my children face today with children of their own to raise. Our older generation has had challenges and trials in the past but, let’s face it, most of us had it pretty easy when we were their age. The past 30 to 40 years have been generally years of growth and prosperity.
Times are very different today. Many young parents feel that they can only do so much. They realize that it will be expensive for their children to get career training. However, that problem is years in the future and does not seem like a pressing concern today. After all, these young parents, our children, have their hands full financially paying off their own student loans, carrying life insurance, managing rent or mortgage payments and covering the costs of raising children.
But the older generation knows the importance of investing early and the “magic of compound interest”, that a small amount saved early and regularly can result in big savings over time. For these reasons, many grandparents, annoyed at what may seem like wasted money buying another unnecessary or unneeded gift, are looking to the future. They are creating legacies by setting up registered education savings plans (RESP’s) for their grandchildren. It is an effective way to help young families financially as well as to transfer wealth to them without tax implications.
Within an RESP, the federal government allows the savings to grow in a tax-sheltered account. As well, they will add a minimum of 20% in the form of a free grant of up to $400 on top of the growth that the chosen RESP realizes. Some non-profit group RESPs even have dividend “top-ups” added to the returns. That is attractive!
Although the basic rules governing RESPs are governed by the federal government, each RESP has unique features. All RESPs are not the same. It is therefore wise to know the differences before making a decision. Safety and flexibility are important features. After all, you want to be sure that the money will be there when needed.
For grandparents, establishing an RESP will be of huge benefit to their own children by helping with a significant financial burden. It will also have a truly meaningful impact on the grandchild. It does not take much imagination to visualize what a child will feel when he or she completes high school and realizes that grandma and gramps set up a trust for them to pursue career dreams. Legacies do not get much better. It is well worth serious consideration.
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