Most Canadians say it is appropriate to give cash as a gift to their children or grandchildren. But would an RESP contribution be better?
In a poll of more than 1000 adults conducted for Edward Jones, 60% of the respondents said that they were comfortable giving cash to their kids or grandkids, but only 39% thought money was a suitable present for other family members and just 23% said they would give cash to their spouse or friends.
Edward Jones says that those who decide to give money to their children should offer them some financial advice at the same time.
One suggestion is to use the gift as a way to teach them about investing. "Even fairly young children can comprehend what it means to invest in stocks, if it's carefully explained to them," says Edward Jones. "Use examples of the companies with which they may be familiar, like entertainment companies, consumer packaged goods, or fast food restaurant chains – and stick to the basics."
Another idea is to pay the gift into the child's education fund. This will end up generating more money since contributions of up to $2,500 that are paid to a Registered Education Savings Plan (RESP) receive an additional 20% thanks to the Canada Education Savings Grant.
"Canadians tend to spend the most on their children, and cash makes for an easy, acceptable and often desired present," says Patrick French, director of financial and retirement planning with Edward Jones. "However, parents and grandparents may want to consider taking this gift a step further, and give children some practical advice when handing over an envelope of money."