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When building a house, you start with a solid foundation before you start framing the structure. Below are two ways your child’s (grandchild’s) financial foundation can be set up for success.

 

Option 1A – RESP

A Registered Education Savings Plan (RESP) can be part of every family’s financial plan. The Government will contribute 20% of your contributions up to $500/year. You contribute $2,500 and $3,000 is invested in a tax-deferred account. A 20% rate of return before the funds are even invested.

A $7,200 cap on government contributions up until your child turns 18.

You can contribute up to $50,000 per child and have 35 years to use the funds.

When your child goes to post-secondary school the income received is taxed in their hands (little or no tax consequences as they are not likely earning much while attending school).

One minor drawback, if your child does not attend a qualified post-secondary institution and you want to close out the account all grants received and any investment growth those funds received are returned to the government.

Your contributions are not taxed, however, any investment growth earned on those funds is considered interest income and is taxed accordingly.

 

Option 1B – Permanent Life Insurance

Purchasing a cash value life insurance policy also has a tax-deferred investment account built into the plan’s structure. While there is no government grant, there is also no $ 50,000-lifetime contribution limit or restriction on what the funds can be used for.

  • Help Start a business (Walt Disney (Disneyland), Ray Kroc (McDonald’s) both leveraged their WL policies and they did alright)
  • Down payment for their first house
  • Funds to travel. The world will be open by then
  • Buy their first car
  • Help pay for any type of education
  • Also, your child now has the added benefit of being insured no matter their health, occupation, or hazardous hobbies they take on in the future. This factor is often overlooked until too late for some. Giving the gift of guaranteed insurability is priceless

 

Example:

Contribute $2,500 per year for 17 years from birth into each product. Assume a 5% annual rate of return and no additional contributions.

RESP plan with $42,500 in contributions will be worth $86,000 (Including a $7,200 Government Grant) by the time your child goes to school. This is the best option available to pay for tuition and other eligible expenses.

An example illustrating Participating Whole Life Values is noted below using $42,500 in total contributions. The cash value can be accessed at any time for any purpose. This is your asset and you have control over the use of the funds. In addition, your child has a death benefit that continues to grow every year.

 

Year Participating WL Cash Value Participating WL Death Benefit
18 $44,163 $322,171
25 $63,351 $369,600
30 $78,677 $409,467
35 $99,828 $447,076
40 $126,036 $483,383
45 $158,365 $519,503
50 $197,538 $556,579
55 $245,828 $595,278
60 $304,427 $636,505
65 $373,813 $681,334

• 20 pay WL product max funded for 17 years. Current -1% Dividend Rate

 

Please reach out to discuss your child’s financial foundation.

 

 

If interested in learning more,
Don’t hesitate to reach out to us today.
CFS Wealth 1-888-451-6133 or fill out our contact form.
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Confidently invest in your future with CFS Wealth Management. We bring together a team of experts professionals, who each provide a unique and proven approach. At CFS Wealth Management Inc. we proudly offer proven financial strategies to create, build, protect and transfer your wealth.

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Maple, ON
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Monday-Friday: 9AM-5PM
Tel: 1.888.451.6133
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Box 20011
Maple ON
L6A4M4

Questions?
Contact us today and begin the process of unlocking your former employer pension plan today!
About Us

Confidently invest in your future with CFS Wealth Management. We bring together a team of experts professionals, who each provide a unique and proven approach. At CFS Wealth Management Inc. we proudly offer proven financial strategies to create, build, protect and transfer your wealth.

Head Office
22 Kaia Crt
Maple, ON
L6A 4T9

Secondary
9980 Dufferin St.
Box 20011
Maple ON
L6A4M4

Tel: 1.888.451.6133
Fax: 1.866.410.2675
Email: [email protected]

Mon-Fri: 8AM - 6PM

Questions?
Contact us today and begin the process of unlocking your former employer pension plan today!
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