Tax Smart Gifts for Your Children

Friday, July 11, 2014

Savings accountsAny parent or grandparent would be more than happy to know that their little ones are doing well financially. However, you need to understand that living is getting more expensive by the day. Therefore, your child may need a little financial boost before they start earning and supporting themselves and their families. Fortunately, there are many tax smart ways of achieving this goal, including the following four. 

Consider Investing in RESPs

It is quite apparent that the cost of education will rise in the future. To help your child with these, you can invest in a Registered Education Savings Plan.  Through it, you will be able to accumulate your savings and earnings without paying taxes.  Depending on your investment, the government will contribute 20% on a yearly basis.  

Provide a Custodial Account

Custodial accounts are subjected to various tax credits that normally are not offered to you. Not only do these accounts teach kids about investing in the future, but they can be used for anything financially beneficial for them. After reaching a certain age, the child is handed the sole ownership of the account to do as they see fit. 

Education Tax Credits

If you are making payments on tuition, you are fully eligible for the non-refundable education tax credits offered. The only requirement is that the student attends the institution full time. These tax credits can later be invested into more financially constructive ways. 

Invest In a Tax-Free Savings Account (TFSA)

You can also make use of a Canadian TFSA. Not only is this type of account flexible, but it is designed to meet the basic lifetime savings needs of any individual. These accounts can come in handy when investing in your child’s future as the money they accumulate over time can be used to fund future investments. 

So take advantage of these tax smart methods to help your children withstand the tougher financial times they have ahead.