Giving your children and grandchildren the greatest gift of all

You have spent a lifetime building a legacy. The most valuable asset you will ever pass down, however, cannot be measured in a bank account, property or an investment statement. It is the wisdom to manage wealth well.

For families who have worked hard to build and preserve wealth, one of the most important questions is not "What will we leave behind?" It is "Will the people we leave it to be ready for it?" The answer, more often than not, may surprise you.

Smart education funding tools for their future

Funding an education is about more than paying tuition. It is the first step in teaching your family how wealth behaves – and using smart tools that grow alongside them.

Canada offers several tax-efficient ways to help children and grandchildren pay for post-secondary school. Each has its own rules, benefits and best uses – and together, they can form a powerful funding strategy.

Registered Education Savings Plans (RESPs)

Think of the RESP as your family's education foundation. It is a dedicated space where your investments grow quietly, shielded from tax, waiting to fuel their biggest dreams.

You can contribute up to $50,000 per child throughout the lifetime of an RESP plan.¹ The federal government also adds a Canada Education Savings Grant – an additional 20% on the first $2,500 you contribute each year. That means up to $500 annually, and up top $7,200 over a child’s or grandchild’s lifetime.² 

Importantly, your investments grow inside the plan without being taxed, much like a Registered Retirement Savings Plan (RRSP). When your child or grandchild withdraws the funds for school, the growth and grants are taxed in their hands – not yours.³ Because students typically have lower or no incomes, they pay very little tax, if any at all.

For more details, check out RBC Royal Bank’s RESP site or speak to your Investment Counsellor.

Informal trusts (in-trust accounts)

An informal trust – also called an in-trust-for (ITF) account – is a simple, low-cost investment account opened by an adult on behalf of a child. No formal legal agreement is required.⁴ Capital gains earned inside the account are generally taxed in the child's hands, often at little to no tax.⁵ This makes an ITF a useful complement to an RESP, particularly once RESP contribution room has been maximized.

There is one key detail to keep in mind: when the child reaches the age of majority – 18 or 19, depending on the province – they gain full legal control of those funds.

Formal education trusts

A formal trust – established through a written legal trust agreement – offers far greater control and flexibility.⁶ Unlike an informal trust, it allows parents or grandparents to decide when and how funds are distributed, often deferring access until a child/grandchild reaches a specific age or milestone. Think of it as a thoughtful guide: it ensures your wealth serves as a ladder to help them climb, rather than a safety net that stops them from trying. This structure is particularly valuable within a family office context, where multi-generational planning and governance are central priorities.

Gifting

Direct gifting is straightforward: funds are given to a child or grandchild for their education. Simple and flexible, it works best when paired with a clear plan. Speak with your tax advisor to ensure it works within and is appropriate for your plan. Your Investment Counsellor can also help ensure those gifts are deployed tax-efficiently and with real purpose.

Wealth lessons that can help protect their future

Research tells a sobering story about why wealth education is so critical. The Williams Group, a U.S.-based company focused on preparing heirs through education and coaching, studied more than 2,500 wealthy families over several decades. Their findings: 70% of wealthy families lose their wealth by the second generation. By the third generation, that number rises to 90%.⁷

The reason is rarely bad luck or poor markets. In 60%, the cause is a breakdown in family trust and communication. In 25% of cases, it comes down to heirs who simply were not prepared to manage what they received.⁸

Put plainly: wealth without wisdom is fragile and vulnerable.

Teach them that wealth is a sail, not an anchor

The most important lesson you can give a child about money is this: wealth is a sail, not an anchor. It is meant to help them move forward and explore – not to weigh them down or keep them tethered to safe harbour.

Research shows that core money habits can take root in children as early as age seven.⁹ That is not a reason to rush. It is a reason to start early – with simple, age-appropriate conversations that grow in depth and complexity as your children do.

Start simple. Start early.

For young children, the lessons are beautifully basic. Physical coins and bills help make money tangible and real.¹⁰ A three-jar system – one for spending, one for saving, and one for giving – teaches the foundational habits of budgeting, delayed gratification, and generosity all at once.¹¹

As children get older, the conversations can deepen naturally. What does it mean to earn money? Why do we save? What is interest? What is the difference between an asset and a liability? These are not complicated ideas. They are essential life knowledge. And they are far easier to teach when the relationship with money starts young.

Understanding wealth is their best protection

Here is a truth every wealthy family should sit with: people who do not understand wealth are far more vulnerable to losing it. Unprepared heirs may make poor decisions, receive bad advice, or fall under the influence of others who seek to benefit from their inexperience and remove their wealth from them.

Financially literate children and grandchildren, on the other hand, are far better equipped. They know how to ask the right questions. They understand what they own and why. They can spot advice that serves them – versus advice that serves someone else. That kind of knowledge is not just empowering. It is protective.

Build a legacy, not just leave one

The goal is not simply to pass wealth from one generation to the next. It is to pass along the wisdom, discipline and values that created and preserved it in the first place.

This is the heart of family governance. Within an effectively financially managed family, or even a family office structure, financial education is not an afterthought – it is a cornerstone. Families who communicate openly about money, share their values and long-term vision, and take the time to prepare their heirs for what is coming, are the ones who beat the odds.¹²

Your Investment Counsellor: a partner in this journey

It’s important to know that you do not have to navigate this alone – and you should not have to.

Your Investment Counsellor is not just a steward of your wealth. They are a trusted partner who can help you think through the right education savings strategies for your family, introduce the next generation to the concepts and conversations that matter, and connect you with the broader tools and resources available through RBC Wealth Management’s Family Office Services.

The greatest gift you can give the next generation is not a number in an account. It is the knowledge, confidence, and discipline to preserve and make that number grow – and to ensure your family's legacy outlasts you by generations.

Let us build your legacy together

Speak to your Investment Counsellor about how they can partner with you to help your next generation ensure that their wealth works for them.

Sources

¹ Canada Revenue Agency. Managing the Registered Education Savings Plan, taxes and transfers. Government of Canada. https://www.canada.ca/en/services/benefits/education/education-savings/managing-plan.html#_contrib

² Canada Revenue Agency. Canada Education Savings Grant. Government of Canada. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html

³ RBC Royal Bank. What is a RESP and how does it work? RBC Inspired Investor. https://www.rbcroyalbank.com/en-ca/my-money-matters/inspired-investor/investing-academy/what-is-an-resp-and-how-does-it-work-key-things-you-need-to-know-about-this-popular-savings-tool/

⁴ Canadian Accountant. A Canadian tax lawyer’s guide to the In-Trust-For (ITF) Account. https://canadian-accountant.com/content/practice/itf-account

⁵ Ibid.

⁶ Willful. What is a living trust in Canada. https://www.willful.co/learn/what-is-living-trust-in-canada

⁷ The Williams Group. Family Readiness Assessment. https://www.thewilliamsgroup.org/services/family-readiness-assessment/

⁸ Ibid.

⁹ RBC Wealth Management. Teaching Your Kids About Financial Literacy. https://www.rbcwealthmanagement.com/en-ca/insights/teaching-your-kids-about-financial-literacy

¹⁰ Canadian Investment Regulatory Organization (CIRO). The Parents' Guide to Raising Money-Smart Kids. https://www.ciro.ca/office-investor/guides-investors/parents-guide-raising-money-smart-kids

¹¹ RBC Wealth Management. Teaching Your Kids About Financial Literacy.

¹² The Williams Group. Family Readiness Assessment.