How Can a RESP Help Your Grandkids with Debt?Aug 15, 2018
As a grandparent, are you spoiling your grandchildren in the best way possible? A TD Ameritrade study has found that grandparents with millennial children spend an average of $2,383 USD every year on their grandkids. This includes everything: gifts, school supplies, allowances, and more.
You may want to consider contributing to their RESP as a more efficient way to help. A registered education savings fund is a great way to help kids save for university, right from the time they’re born. It’s a savings account with a purpose, as it will bring in a greater value in the end then certain toys and games they may want. Those contributions are also sharing a message: as a grandparent, you want to help limit your grandkid’s student debt load and help them reach their career dreams.
With a RESP, small contributions quickly add up. The federal government adds a $500 grant when personal contributions reach the max of $2,500 a year. This 20 per cent is on top of the interest that already compounds.
Yes, there are caps, but an early start on a RESP means you have more time to watch the money grow. It’ll help your grandkid have more money saved when they’re shopping for universities, maybe even helping them open doors to schools they wouldn’t have previously considered.
It works for parents too. Instead of spending on extracurricular activities and an allowance, small contributions that are matched by the government stretches your dollar further. That might allow you to explore your own debt relief options, setting yourself up better for the golden years of retirement.
Want to learn more about helping financially during the back to school season? Listen to this BDO podcast, which includes advice from BDO Licensed Insolvency Trustees (LITs) for both parents and grandparents.