Building Wealth Across Generations: A Guide to Saving for Your Children's Future

The Challenge Every Parent Faces

We frequently hear the same question from clients: "I'm maxing out my RESP contributions—what's next?" It's a question that reflects both financial discipline and the deep desire parents have to set their children up for success. But the answer isn't as straightforward as many would hope.

The reality is that beyond RESPs, the investment landscape for children's savings becomes murky. There's no single perfect vehicle, no government-blessed account with matching contributions waiting in the wings. Instead, parents must navigate a patchwork of options, each with distinct trade-offs that deserve careful consideration.

Why RESPs Are Just the Beginning

Let's start with what works exceptionally well. Registered Education Savings Plans remain the gold standard for education savings, offering a 20% annual government match on contributions up to $2,500 per year—translating to a maximum lifetime grant of $7,200 per child.¹ This guaranteed return is difficult to replicate elsewhere.

However, limiting contributions to $2,500 annually makes strategic sense. Once you've captured the full government match, the RESP loses its unique advantage. The lifetime contribution limit of $50,000 per beneficiary offers room for additional savings, but without the grant incentive, other vehicles may serve your broader financial goals more effectively.

The Access Problem

Here's where things get complicated. When we work with families on multi-generational wealth planning, one concern emerges consistently: accessibility. Not for the children—for the parents themselves.

Consider the psychological difference between an RESP and a standard savings account. With an RESP, early withdrawals mean forfeiting government grants and facing tax consequences. There's built-in friction that protects your long-term intentions. A TFSA or high-interest savings account? You can drain it for a kitchen renovation with a few clicks.

We're not suggesting our clients lack discipline. But financial planning works best when account structures align with behavioral reality. The easier it is to access funds, the more likely those funds will be redirected to other priorities when life presents unexpected expenses or tempting opportunities.

Informal Trust Accounts

An informal trust (or "in-trust-for" account) allows parents to invest on behalf of a minor while creating a psychological—if not legal—barrier against spending. You designate these funds for your child, which helps protect them from impulsive decisions.

The catch? Recent tax changes effective December 1, 2023, now require most informal trusts to file annual tax returns, adding administrative complexity that didn't exist previously.² Additionally, any investment income generated in these accounts is typically attributed back to the parent for tax purposes if the parent contributed the funds, unless the income is from capital gains.

Formal Trust Structures

For families with substantial assets to transfer, formal trusts offer ironclad protection. You can stipulate exactly when and how funds are distributed—say, 25% at age 25, another 25% at 30, and so on. A trustee ensures these rules are followed, removing any temptation to deviate from your plan.

The downsides are administrative costs and complexity. Trusts require legal setup, ongoing maintenance, and annual tax filings. For most families saving $10,000 to $50,000 for each child, the administrative burden may outweigh the benefits.

Using Your Own TFSA Room

Some advisors recommend designating a portion of your TFSA contribution room specifically for children's future needs. The appeal is clear: tax-free growth with maximum flexibility.

However, this strategy sacrifices your own retirement planning capacity. Every dollar of TFSA room used for your children is a dollar that can't compound tax-free for your own future. For clients who haven't maximized their retirement savings, we generally recommend prioritizing your own financial security first - you can't take out loans for retirement the way your children might for education.

Whole Life Insurance

A less conventional approach involves purchasing whole life insurance policies in children's names. These policies build cash value over time that children can eventually access, either by withdrawing the cash value or maintaining the death benefit.

The advantages include forced savings discipline and the ability to lock in low insurance rates while children are young and healthy. The disadvantages are complexity, higher costs relative to term insurance, and returns that may underperform traditional investments over time.

Teaching the Next Generation to Invest

While you're building assets for your children, consider involving them in the process. Recent data reveals that 68% of Gen Z Canadians are investing consistently on a yearly basis—the highest percentage across any demographic.³ Among teenagers aged 13-17, 63% plan to invest.⁴

This early interest presents an opportunity. Rather than waiting until children turn 18 to open their first brokerage account, parents can start building financial literacy much earlier:

For Young Children (Ages 4-10) Start with tangible concepts. Give them small amounts of cash to manage during family outings. Let them experience the transaction, understand that money is finite, and make decisions about spending versus saving.

For Pre-Teens (Ages 11-14) Introduce compound interest and basic investment concepts. Board games that involve property, rent collection, and strategic financial decisions can make abstract concepts concrete. This is also an excellent time to open a no-fee savings account that they can monitor and contribute to regularly.

For Teenagers (Ages 15-18) Consider opening an informal trust account and purchasing investments where there are names of companies they recognize - not as speculation, but as education. When those companies appear in the news, discuss how business performance affects stock prices. Programs like Junior Achievement Canada's Investment Strategies Program allow students to manage virtual $100,000 portfolios linked to live market data, providing risk-free learning opportunities.⁵

The goal isn't to create day traders. It's to normalize investing as a regular financial activity and help them understand risk tolerance before they are managing significant capital.

After working with dozens of families on this exact challenge, we've found that a layered strategy works best for most clients:

Layer 1: Maximize RESP grants Contribute $2,500 annually per child until grants are fully captured.

Layer 2: Assess your own retirement readiness Before redirecting funds to additional children's savings, ensure your retirement accounts are on track. Your financial security protects your children from future burden.

Layer 3: Choose a secondary vehicle based on your priorities If you want absolute protection from accessing funds, consider a formal trust despite the administrative costs. If you want simplicity with moderate psychological barriers, use an informal trust account. If your children are approaching adulthood and you want to teach investing principles, open an informal trust with their involvement in investment decisions.

Layer 4: Involve your children in financial conversations Regardless of account structure, bring age-appropriate financial discussions into regular family life. The financial literacy you provide may be more valuable than the account balance itself.

The question of where to save for children's futures often reflects deeper values about wealth transfer, self-sufficiency, and what we owe the next generation. There's no universally correct answer because families have different priorities.

Some parents want to provide maximum financial assistance, giving children a clear runway for education, home ownership, or entrepreneurship. Others prioritize teaching financial independence, providing modest support while expecting children to build their own wealth.

Both approaches are valid. What matters is aligning your savings strategy with your values and then structuring accounts that support your goals rather than undermining them with excessive accessibility or administrative burden.

If you're wrestling with these decisions, we're here to help. Every family's situation is unique—income levels, existing savings, number of children, risk tolerance, and values all factor into the optimal strategy.

We encourage you to schedule a review meeting where we can:

The financial foundation you're building for your children is one of the most meaningful gifts you can provide. Let's make sure it's structured in a way that serves your family for decades to come.

As always, we are grateful for your trust and the opportunity to be part of your family's financial journey.

^{1 Government of Canada, Canada Education Savings Grant program details}

^{2 Canada Revenue Agency, Trust reporting requirements effective December 1, 2023}

^{3 TD Bank, 2024 Financial Wellness Survey}

^{4 RBC and Leger, 2023 Youth Financial Literacy Survey}

^{5 Junior Achievement Canada, Investment Strategies Program}