Education costs are hitting sky-high in Canada. The majority of the students suffer from financial constraints due to a lack of funds for the costly degrees, the burden of student debt, etc. Many students are even forced to give up on their dream careers due to inadequate education funds.
You want your child to be financially literate at an early age. One of the most crucial things for securing your child’s education is planning ahead. You can teach them about finances and how it affects their savings. You can make it interesting for them by organizing learning activities.
The smartest way to do this is by starting early. The earlier you start, the greater time you allow money to grow. You can also consider investing in a child plan. Check here for more information.
6 ways to save money for your child’s education
It is essential to start saving for your child’s education as soon as possible. This way, you can ensure that they are not burdened with debt when they graduate from college or university.
Educating your child about financial literacy
You can invest in stocks, bonds, or mutual funds through an investment plan specifically designed for children. Plans like these save you a good amount of tax-free money, in some cases.
It is important to teach kids about money since they will be inheriting it one day. This can be implemented by educating them on the value of money and how to save it.
There are several ways that children can learn about financial responsibility.
- You can teach them how to open a savings account, give them an allowance for chores, or even teach them the value of money by paying different prices at the grocery store.
- Children should start saving as soon as they are old enough to understand the concept of money. They should also be taught that saving money will allow them to buy what they want in the future and that spending money now will only make them want more things later on.
- Parents need to help their children develop good financial habits. This starts with teaching them how to save money and then gradually moving on to more complicated topics like insurance, investing, and taxes.
Purchasing a life insurance policy helps ensure that your child has enough money to pay off any debts and other expenditures if you die. Sometimes, the idea of investing in life insurance can be unsettling. If both parents have life insurance, investing in life insurance for your child can be a good idea. This is mainly due to two reasons:
- Child’s insurance coverage ensures future stability if they face any health issues.
- When you get insurance at an early age with good health, the premiums are much more affordable.
Registered education savings plan (RESP)
RESP is a special savings account that the parents can open to save for their child’s education. The Canadian Government also aids in this investment by providing limited funding through Canada Education Savings Grant (CESG)
- You can start an RESP investment even without having a bank account.
- After opening the RESP account, you can make deposits for 31 years from the start date. After the 31st year, you can transfer the savings from multiple RESPs into a single plan.
- Your child should use the RESP funds before 36 years. After which, the funds deposited by the Canada Education Savings Grant (CESG) will be returned to the Government.
- The personal savings will be reverted to the person who invested in the account.
- Remember, every RESP investment plan is different; therefore, consult with the scheme experts before investing.
Invest in child funding schemes
RESP is strictly education-based funding. However, education is not the only expense as your child grows up. Medical expenses, business fundings, real estate investments, getting professional certifications, etc., also require substantial expenses.
In fact, if your child wants to pursue advanced courses in Canada or anywhere else in the world, RESP alone might not be sufficient.
In such cases, child funding schemes such as whole life insurance can be beneficial. You can invest in a child funding scheme as early as 14 days after the birth of your child.
Whole life insurance offers a tax-free dividend to your child annually after a certain age limit, which they can use for registering into an educational program, funding a start-up, down-payment for first real estate, medical emergencies, or fulfilling any other goals.
Invest in a savings account
The first step to building good financial behavior is establishing a savings account for your child. The child should understand the value of money and how saving can lead to future benefits. You can start by educating them on saving, then gradually increasing the amount they save as they grow older.
In order to teach children about saving, parents need to be an example. It is also important that parents actively participate in their children’s finances during the initial years. Help them learn about budgeting and spending responsibly.
Minimizing social expenses
The pandemic has defined certain standards for the “new normal.” Even with the world gradually opening up, social distancing and masking are still encouraged. This means you still have the advantage of maintaining social bubbles during events, social gatherings, parties, and get-togethers.
Therefore, now you’ll reconsider throwing elaborate birthday parties or organizing extravagant social gatherings. The one incredible benefit to this situation is that you have the opportunity to save some money.
For example, an elaborate birthday party in the pre-pandemic era might cost you $200-$300. However, a small party with close friends or a virtual celebration will minimize that expense into $50-$100. You can invest the saved dollar into an RESP or whole life insurance plan.
Various surveys show that parents were left in regret when they couldn’t provide financial security for their child’s education.
Having an education fund can be a life-changing gift for your child. Reconsider your monthly and annual budget. Diversify your funds into various schemes to generate solid financial support for your child’s future.
Most importantly, start saving. Don’t forget to hire a financial expert to plan your investments.