Is your client expecting a new family member? What an exciting time, but equally as scary when they begin to consider all the uncertainties that come with parenting.
First day of school, learning to drive, parties and dating… over the years, there will be plenty of things for your client to worry about as their child grows up and ventures into an independent life – however, finances should never be one of those worries. Here are a few key aspects for your client to consider when laying out a solid financial foundation for the newest members of their growing family.
Savings For Those Important Milestones
Life is full of exciting new milestones; attending university or college and buying a first home are perhaps amongst the most significant, not to mention costly. As a new parent, what should your client consider today and how can they best prepare for the future?
Post Secondary Education: At first glace, the most common concern is saving for a child’s post secondary education; rising costs of tuition and housing have made it necessary to save now, well before that those milestones arrive. The government sponsored Registered Education Savings Plan (RESP) account is an obvious and strong choice for your client to consider for the following reasons:
- Availability of federal government grants – the government will match 20% of your client’s contributions up to $500 per year, to a lifetime limit of $7,200. Free money!*
- Tax-free growth of the investments within an RESP – your client can contribute up to a lifetime maximum of $50,000 per child and although the income is taxable in the student’s hand when withdrawn, as a student, they are typically in a much lower tax bracket.
Be sure to check out (and share!) PPI’s SMART TALK… about registered education savings plans (RESPs) video, our Getting the Most from Your RESP article and the RESP calculator to help your client discover winning strategies on how they can maximize their child’s RESP… because the sooner they invest, the faster it grows!
First Time Home: With inflation and the affordability of home ownership being top of mind, many parents are wondering how they can help their child create savings for when this pricey milestone approaches. Some considerations that your client can take into account:
- In-trust-For savings accounts (ITF) – Once an ITF is opened, as trustee, you can make contributions or investments into the account on your child’s behalf, but you must use any withdrawals for their benefit. Then, once they reach the legal age of majority in the province in which they live, they are entitled to the account’s proceeds.
- Downsizing – when your child leaves the nest, you may be able to downsize the family nest and gift some proceeds to your child to help them get a head start in purchasing their own home.
Life insurance products – There are a number of future financial advantages and guarantees to explore when you purchase permanent life insurance for your child. And, until you decide if and when to pass along the asset to your child, you have full ownership over the policy and its cash values.
Insurance As A Financial Tool
Life insurance products can help secure a child’s future insurability, as well as leverage the unique attributes of insurance to create a tax-advantaged asset that can be accessed in the future.
Below are a few key considerations regarding juvenile life insurance and how it can offer your client financial solutions for their child.
- Securing insurability – many juvenile insurance policies will allow benefits to grow over time. Securing the insurance contract will guarantee that the policy will payout at a later time, regardless of the child’s health in the future, including what they may face as adults.
- Unique asset – these policies can generate significant values which can be accessed at various times by the policy owner and exempt life insurance policies, that children can qualify for, will grow without the result of annual taxation!
- Fixed cost – these plans are often set with a fixed number of payments which either parents or grandparents can fund.
Likewise, critical illness (CI) insurance coverage provides unique protection and asset qualities.
- Comprehensive coverage – critical illness insurance pays while clients are alive. Also known as living benefits, these policies typically cover a large number of illnesses and conditions (including the major three: cancer, heart attack and stroke). Child CI policies not only cover the 25 conditions in full, but also a number of child-related illnesses.
- Unique asset – many child CI policies have unique return of premium options, which will allow the policy owner to receive a lump sum return of premiums paid if the benefit has not been used, allowing the policy and its coverage to continue!
Looking for more information to share with your clients on the financial benefits of insurance? Be sure to share articles Choosing Insurance that Grows with You and Do Younger Canadians Need Insurance?, as well as the Exploring Your Life Insurance Options tool, because knowledge is power.
*Some provinces offer additional incentives or grants. Please contact us to learn more.