Grandparents might contribute to a grandchild's RESP, FHSA or TFSA. For grandchildren under age 18, support may be more hands-on, advisors say.nd3000/AFP/Getty Images
Many grandparents are looking for ways to support their grandkids but are unsure of the best approach.
Bryton Keyes, associate investment advisor at iA Private Wealth Inc. in Kitchener, Ont., says many grandparents in his client practice now prefer to give money while they’re still alive instead of leaving an inheritance when they die.
“They want to see the grandkids enjoy it,” he says.
That doesn’t mean grandparents just hand over cash. He says some may contribute to a tax-free savings account or the first-home savings account for eligible grandchildren. But for younger grandchildren under age 18, support may be more hands-on.
Here are four financial and non-financial trends advisors are seeing:
1. Supersized education funds
If parents are falling behind on saving for their kids’ post-secondary education or trade school, Mr. Keyes says making contributions to a registered education savings plan is one way grandparents can make a difference.
Some will contribute $2,500 a year, which is enough to ensure the child receives the maximum yearly Canada Education Savings Grant (CESG) of $500. Others want to contribute larger amounts in hopes of growing the funds more quickly through compounding.
Mr. Keyes has two strategies for this approach: For those who can afford it, grandparents could “supersize the RESP” by contributing the full $50,000 lifetime amount from the start. While doing so means losing the CESG, except for $500 in the first year, investing more money means potentially having more to work with down the road.
“The idea is to give it a longer time to compound tax deferred and build up the RESP into an even larger amount,” Mr. Keyes says.
Another option is to provide $14,000 upfront and then contribute $2,500 annually until the child reaches age 15, ensuring they receive the maximum CESG of $7,200.
“You still get the maximum amount of grants you’re entitled to, but adding that extra at the beginning upfront just gives a bigger base to compound,” he says.
2. Helping with extracurricular expenses
Mr. Keyes has several clients who assist their grandchildren financially with extracurricular activities, especially if those kids are in a competitive program. Competitive arts or sports leagues, for example, often involve travel and can cost thousands of dollars a year in registration fees, equipment, uniforms, costumes and tournaments.
“Those expenses weigh on the parents’ budget,” he says, adding that any grandparents aren’t just happy to help but often want to tag along to watch their grandkids play or perform. “They get to see the firsthand benefits of what they paid for.”
Hervin Pesa, certified financial planner at Aware Financial in Calgary, says that some of his grandparent clients aren’t just footing the bill but are the ones driving their grandkids to practices.
Mr. Pesa can relate. His in-laws chose to pay for his three children’s swimming lessons as their annual birthday presents – a gift he says is appreciated and put to good use.
“They come and watch them swim – and it’s fun for them,” he says.
3. Funding travel experiences
Many of Mr. Pesa’s grandparent clients are also looking to use their wealth to travel with grandkids for fun and to create lasting memories.
“[It’s about] how can they use it to connect” with grandkids, he says.
Some clients already have extensive vacation budgets as part of their financial plans and can easily extend an invitation to their children and grandchildren, Mr. Pesa says.
In cases in which the grandparents live further away, travel can simply mean visiting their grandkids more frequently or sending them a plane or train ticket to come to them.
“They can look back on these shared experiences with their grandchildren ... and forge more family connection,” he says.
4. Building community engagement
Conor Amyot, senior consultant at IG Wealth Management Inc. in Oshawa, Ont., says some grandparents want to share their philanthropic initiatives as a way for grandchildren to understand the concept of giving back.
He recommends grandparents bring grandkids to charitable giving events as a way to instill the value of helping those in need.
“Seasonal initiatives like toy drives are especially well-suited for grandparents and grandchildren who often spend more time together during the holidays,” he says.
Mr. Amyot notes that adding a fun challenge or setting a shared family fundraising goal can also nurture entrepreneurial thinking.
Mr. Keyes says his kids’ grandparents have come into their schools to share past work experiences and hobbies.
“It’s a great connecting point and the kids are very excited to ‘show them off’ too,” Mr. Keyes says.