How to Help Your Grandkids Reduce Back–to-School DebtJul 05, 2018
Though the days of throwing on a backpack and walking to school are well behind you, grandparents can still play a role when back-to-school season rolls around. As their kids try to reduce the debt of a costly parenting season, grandparents can find opportunities to help out reduce cost for back to school.
But what if you have other financial concerns? A recent study from Equifax shows that, of all age segments, Canadians 65 and over are adding consumer debt at the fastest rate (up 4.3 per cent from 2016 to 2017). Albeit, seniors have also shown to have lower delinquency rates than other age segments.
If you’re needing relief or help with your own debt, it’s not easy to navigate chipping in money for others when back-to-school time starts. Still, there are small things grandparents can do as their grandkids go from primary to post-secondary education.
This summer is a great time to start a conversation with your kids about these two ways you can pitch in.
Contribute to your grandchild’s RESP as they grow. A registered education savings fund is a great way to help kids save for university from a young age. Because it’s a savings account that can only go to one purpose, it’s a great fund for grandparents to invest in — it shows, in its own way, that you want your grandkids to achieve their future career goals.
When grandkids are young, even small contributions can add up too. The federal government currently adds a $500 grant when personal contributions reach the maximum of $2,500 in a year — a 20 per cent return on investment. There’s also interest compounding over time.
While there are caps to consider, starting early on RESP contributions means a better reward when your grandkid is ready for university, and less likelihood that they’ll graduate with a large amount of student debt.
Provide a place to stay for university-aged grandkids in your neighbourhood. Statistics show that 63 per cent of grandparents say looking after their grandchildren gives them “an amazing chance to spend time with them”, so providing a place to stay during their university years can make financial sense while providing an emotional boost. For those in the millennial generation looking for opportunities to cut on big-picture costs, this could be a great chance for grandparents to step in.
It’s also not an uncommon practice either — Stats Canada says that 9 per cent of kids live with a grandparent in a “skip-generation household”, where an intermediate generation isn’t present.
Find out a new way to deal with your existing debt. Summer for grandparents can also be an opportunity to research debt solutions that work for their situation. By exploring options like consolidation — taking all your sources of consumer debt and combining them into one monthly payment with a lower interest rate — seniors can make a long-term plan to get rid of their existing debt.
This obviously works to reduce debt, but it also frees up retirement income to help grandkids through the tips above.