The arrival of a baby brings joy and as well as a responsibility to the family. Parents face consistent pressure to secure their children’s future- education, lifestyle, marriage, etc. In Canada, there are a plethora of investment opportunities ranging from government plans to comprehensive private child plans.
However, planning and investing in the right place at the right time are the key. Similarly, start as early as possible to help grow your capital effectively. Every parent needs to keep their children’s goals in mind while selecting the investment option.
Careful planning and balancing the investment remains a challenging task for parents. In this guide, we have listed some essentials to secure your child’s financial future. Check this article if you are looking for comprehensive child plans.
Top 5 ways to secure your child’s future financially
Here are some ways you can secure your child’s future:
Open a Savings Account
Open a savings account to build a habit of saving in your child. While your child is not eligible to open an independent savings account, you can get one under your name. Once they attain the age of 18, you can transfer the account to the child.
Small savings also make children responsible and financially aware. It is a great option to deposit occasional stipends and gifts.
Apply for the Canada Child Benefit plan
Apply for the Canada Child Benefit (CCB) to get up to $6,639 per year for children under six and $5,602 per year for children 6 to 17. The monthly payments are tax-free and empower eligible Canadian families to help raise their children.
This plan is approved after ascertaining the previous year’s income of a family and the total number of children. CCB could also combine National Child Benefit (NCB) and Child Disability Benefit (CDB).
Open a Registered Education Savings Plan (RESP)
Going by the inflation trends, education will become the most costly affair in the near future, especially post-secondary education. As per the official figures, today, a student spends approximately $60,000 for a four-year post-secondary education program. This figure does not include travel, boarding, tuition, and other expenses.
A registered education savings plan is the best option to keep up with this expense. Simply put, it is a savings account for parents to save money for their children’s education after high school. Furthermore, it is also considered a tax-sheltered investment that gives access to the Canadian Education Savings Grant, Canada Learning Bond, and tax-deferred investment earnings.
A subscriber (parent) having an RESP account becomes eligible for additional benefits- the government may offer a 20% Canada Education Savings Grant (CESG) on contributions of up to $2,500 per year per child. In addition to this, low-income providers may also be qualified for other government benefits.
Open Registered Disability Savings Plans
Like RESPs, a registered disability savings plan (RDSP) helps parents and others to secure the financial security of a child who is eligible for the disability tax credit. An RESP plan covers education costs, but RDSP is a long-term saving designed for retirement benefits.
Contributions to an RDSP can be made until the beneficiary turns 59. However, such contributions are not tax-deductible.
Get a life insurance
Apart from the strategies mentioned above, getting life insurance for yourself is vital to the child’s financial security if you pass away unexpectedly in the future. By doing so, you not only secure the financial well-being of your child but the whole family.
Some of the popular life insurance options for parents are:
- Permanent life insurance: This plan stays active until you die. It combines savings with death advantages.
- Term life insurance: It offers protection for a term. Standard terms are 10 years, 20 years, and 30 years.
- Traditional life insurance: This term is synonymous with universal life insurance and whole life insurance. It also provides coverage for the whole life, but there is a guaranteed sum for survivors.
Benefits of financial planning for the future of your child
A well-laid-out financial plan for your child’s future guarantees complete peace of mind to beat inflation. In addition to this, some of the key benefits of financial planning are:
- Help achieve future goals: Systematic investments have the power to realize any dream of your child. The investment strategy should complement the goals of your child.
- The financial well-being of your child: Small investments over time can do wonders. Your investment would provide your child with the much-needed financial cushion to grow. Furthermore, it also helps in building wealth.
- Education cover: The cost of higher education remains the biggest nightmare for parents in Canada. Financial planning can help tackle this situation effectively.
- Reduced risk: Financial planning such as life insurance ensures complete coverage for your child in case of any uncertainties in the future. Therefore, even if you are not around, your child’s dreams are secured.
- Financial flexibility: Starting early means you do not have to cut significant expenditures in the future. You can fully enjoy your life without compromising on standards if you have a robust financial plan in place.
How to save for your child’s future
There is no right time to start the savings. You can start as early as after the birth of your child. To get the best results:
- Hire a financial advisor to maximize the results within limited resources
- Shop around for comprehensive child plans that offer maximum coverage and flexibility
- Cut out on additional expenses such as costly tours and leisurely items.
- Create automated mandates to transfer the funds to saving schemes.
According to past data and current inflation trends, the cost of living is rising rapidly. In the absence of financial planning, your child will be exposed to uncertainties and financial vulnerability in the future. Therefore, it becomes a moral obligation of every parent to safeguard the interests of their children.
However, every child is unique, so are their goals. Hence, always take a personalized approach based on your child’s requirements. Random investments are of no use and do not guarantee your child’s personal and financial success.
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