I bet the financial security of your children is always on your mind, whether you’re dealing with a current issue or even if it is just a lingering uncertainty about what might happen. Luckily, you can look after their financial security by taking a few practical and straightforward financial, tax and estate planning steps.
Early financial education
Starting when your children are young, focus on educating them about money. Talk to your children about financial issues that matter to your family such as housing costs and vacation options. Children will take a greater interest in financial matters if they are included in the conversations.
Another tip gaining momentum is allocating allowances into three jars, for saving, spending and giving. This illustrates the effectiveness of saving over the long term, the importance of charitable giving and the scarceness of financial resources.
Registered Education Savings Plans
If you want to protect your children from the dangers of debt, start investing in a Registered Education Savings Plans (“RESP”). This is perhaps the best way to ensure that your children are not burdened with debt as young adults.
Fast forward a few years, make sure your children understand the difference between good debt (mortgage) and bad debt (credit cards). During their post-secondary years, your children may be tempted to rack up credit debt. And, while this is a mistake that most people recover from, it is obviously best to avoid it by developing good credit habits early on. And don’t forget, these are great years to get them familiar with the benefits of making early Registered Retirement Savings Plan (“RRSP”) contributions.
An effective estate
Having a clear estate plan is essential. Without clear instructions, families can face unnecessary conflict between potential heirs. This is especially true if your family is blended and you have children from a previous marriage. Are you planning on leaving money to your children? Do you want to set up a charitable trust? If you have a cottage, who is it passed down to? You need to answer and document answers to questions like these.
If these issues are on your mind, I think it is a good time we set up a family meeting with me, you, your spouse and your children. We’ll talk about your estate goals. If your children know your expectations long in advance, they will themselves have time to adjust their plans and share their thoughts and concerns. Engaging them from the get-go can be critical for success and give the valuable financial insight too.
Let’s talk about preserving your family wealth and ensuring the financial security of your children.