They don’t need batteries, they never go out of style and wrapping’s a breeze. More importantly, they can make a meaningful difference in someone’s life. Financial gifts are an ideal way for your clients to help their loved ones save, grow and manage their money — and there are lots of options!
Cash in hand – Cash gifts are easy to give and a joy to receive. And in Canada, they’re non-taxable. Anyone who receives a cash gift from almost any source — except an employer — doesn’t have to include it in their income. But instead of just tucking money into an envelope (where it could easily be absorbed by everyday spending) encourage clients to tag it for a specific purpose such as:
- a car (or car insurance) payment,
- student loans,
- a long-awaited holiday,
- credit card debt, or
- a mortgage down payment.
The gift of knowledge – Higher education supports career development but it comes at a cost. Tuition fees in Canada have become the single largest expense for most university and college students. Statistics Canada confirms that in 2013/2014, undergraduate students paid $5,772 in tuition fees, on average, compared with $5,586 a year earlier.
Registered education savings plans (RESPs) give Canadians the opportunity to save money for post-secondary education. Grandparents, parents and friends can contribute to an RESP to a lifetime limit of $50,000 per child. Although RESP contributions aren’t tax deductible, any investment income your clients earn within the plan isn’t taxed until it’s withdrawn. What’s more, the federal government adds a Canada Education Savings Grant (CESG) of 20% of what clients put in, up to $500 per year, to a lifetime maximum of $7,200 for each child. Contributors with a lower family income receive a higher grant.
Gifts that keep on giving – A client’s contribution to a family member’s tax-free savings account (TFSA) is an investment in their future. Clients may also want to consider purchasing stocks, bonds or mutual funds in someone else’s name.1 Insurance is another gift-giving option. Grandparents, for example, may want to consider critical illness insurance for children — a product that can offer lifelong advantages and the opportunity to share their legacy during their lifetime.
Financial gifts may also spark greater awareness of money matters. According to the Financial Consumer Agency of Canada (FCAC), financial literacy is essential to the prosperity of Canadians. Among the federal government’s current priorities is to enhance financial literacy of children and youth — and those who receive investment gifts could enjoy a head start.
The value of advice – For a soon-to-be or recent graduate, a young professional or newly married couple, a session or two with a financial advisor may demonstrate the importance of short- and long-term financial planning. Sun Life Financial’s new Money for Life ‘building for the future’ video is a great conversation starter for this demographic. Encourage your clients to connect you with their children or grandchildren, share this video and begin a meaningful dialogue.
1Attribution rules may cause taxable income and capital gains from the investment to be attributed back to the original contributor when gifting to a spouse or minor child.