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Saving Money for Your Children – The Ultimate Guide

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With adequate planning, parenting does not have to be an expensive affair. Saving money for children as early as possible eases the financial burden. Some people decide to start saving money for their kids, from the day the kids are born.

The most important thing is to put some money aside every week or month for your child’s future. There are many saving options available whether you are saving for health, education, emergency fund, investing, or social purposes.

If your dream is like any other parent’s dream, giving hope to your child’s future, here are some incredible tips on saving money that will come in handy any time for financial success.

How to save for children’s education

  1. Anticipate their future needs

While every child will have different future needs or expenses, having an estimate or a rough figure will help you come up with or choose the right saving plan. For this reason, depending on the future you envision for your child, you need first to anticipate how much money they will need in the future to kick start a better life.

For instance, if your child will be going to attend post-secondary education in 10-15 years, what better time to start saving for that than right now? And having an estimated figure of putting money aside will ensure that you achieve the dream of securing your child’s future on time.

Some factors to put into consideration here include the current post-secondary education tuition fee and the rate of inflation. Also, how much time do you have to make the savings? 

After you’ve ascertained all that, here are some options to save for a child’s education in Canada.

  • RESP education fund

If you are aiming to start saving for post-secondary education, the RESP (registered education savings plan) , a government program, is the most well known option in Canada. The RESP was started in 1972 to help encourage people to go to University. With an RESP they government CESG (Canada Education Savings Grant) will match 20% of your annual contributions, up to an annual maximum of $500 dollars and total maximum of $7,200 by the time your child reaches age 17 as long as you deposit $36,000. 

The CESG grant provided by the government is the only reason RESPs are popular as they are. However, with education costs expected to reach over $100,000 for an undergraduate degree many parents are openly asking what value is the $7,200 CESG grant if it only represents less than 10% of the entire education expenses for children born between 2018 and 2021?

The RESP was started in 1972 and the CESG grants were added in 1998. 

  • Participating Whole Life Insurance Plan 

Child Plan is a participating whole life insurance plan and the fastest-growing child-saving alternative plan to RESPs. Unlike RESP, Child Plan is not a government program with government rules on where your child can go to school, what they can study and how the money you saved can be used. Child Plan is a participating whole life insurance plan that gives both parents and their children the freedom to choose their own path in the future for their child’s education and for life. 

One of the biggest advantages is that when you are ready you can transfer the plan completely tax free to your child. No taxes for them to accept this gift and no taxes to you for transferring a financial asset. Unlike RESP, the Child Plan can be transferred at any time after they turn 18, not just at 18. If you don’t feel your child is ready to handle the hundreds of thousands of dollars in the cash value account you can wait to transfer this to them. With a Child Plan you and your child have the freedom in 2035 and beyond to choose whatever education and path they will need to be successful and not only those mandated by the RESP rules. Unlike with RESPs that have no flexibility and can only be used for education and education related expenses, Child Plan allows your children to use the money for their goals in life such as starting a business or put a downpayment on their first property or to go to a trades school or do anything else they’d like with the money. The possibilities are endless.

Also, besides having a lifetime, annual tax-free dividend, the money saved in this plan grows tax-free throughout your kids’ lifetime. In fact, if you want a tax-free investment plan for your kid, which also gives you access to education programs all over the globe at any age of your child’s lifetime, this plan offers that. 

Request for a personalized Child Plan illustration, and see how valuable Child Plan will be for your child’s future.

  1. Automate the saving process

Automating the saving process is important when saving for kids’ education. You need to make sure that the money is deducted before it gets to you. Making the process automatic will ensure that the process is consistent and you will not have any excuse not to save money that month or week.

You can easily do that by putting a standing order with your bank where money is deducted automatically and goes to your children’s savings account. The savings account could be the Child Plan.

With Child Plan, you can make your deposit monthly, annually or pre fund it in one time and get up to a 25% discount on your entire investment.

Example of a parent who wants to invest in Child Plan $2,000 per year over 20 years, can make a one time payment to the insurance company of $32,000 at the start and the insurance company will deposit $40,000 over 20 years into your child’s Child Plan. 

(the information above is an illustration. Some conditions apply and your family advisor will provide further information)

  1. Save Money – Maximize your savings

When saving money for your children, always aim for the maximum. If you anticipate their future needs and you think saving 100 dollars might be enough every month, you can make it 120. This is a good way to maximize your savings and take care of any inconveniences.

In case something happens and you are not able to save money for some months, you will still have enough money to meet their needs. Having some extra money in the account is better than having a deficit that you will struggle to cover.

Child Plan is a 20 year plan, however it’s flexible enough that parents can actually take a one year premium holiday after year 4 and can also request to stop future deposits as early as year 15.

  1. Monitor the money and adjust accordingly

If you want to save money for child education, you need to remember that it is a long-term process. Things are bound to change in the process, and some adjustments might be needed with time. For instance, tuition fees keep increasing, and you might need to adjust your current savings to take care of that.

Your child might also decide to take a gap year before starting post-secondary education, and you might be required to pay for it. So start saving money now in order to prepare for their future financial goals. 

Child Plan participating whole life plan accommodates all those changes. If you are concerned that the future cost of education will be higher than anticipated, with a Child Plan you have the option to add more deposits to your plan over the 20 year period beyond what you initially invested when you opened the plan.

Key takeaway

Putting some money aside to invest in your child’s personal finance is certainly a very noble idea. And since it’s every parent’s desire to see their kids succeed, choosing the right saving plan is quite crucial.

The Child Plan offers an incredible option compared to the other saving options. Not only because it gives the parents the freedom to choose when to allow the kids to use the money, but also because it offers more than an education saving plan. 

With the Child Plan, your child has the freedom to reach their dreams no matter the course they want to pursue or where they wish to pursue it from. In addition,if they opt to do anything else with the money, they can do so. This is certainly not possible with other plans like the RESP. 

If, after evaluating your options, you feel the Child Plan is a good option, you can always request for illustration here to see exactly how much value your savings will give your kids’ future. 

Sample illustration of Child Plan™ Cash and Insurance Values

Based on a Monthly Deposit of $250 per month

Age Accumulated Cash Value Life Insurance Value
20 $82,568 (Education) $612,728
35 $177,953 (House) $1,115,297
45 $303,299 (Security) $1,115,297
65 $834,276 (Retirement) $1,666,824

Sample illustration is based on a monthly contribution of $8.32 a day/$250 a month for twenty years, starting when the child is less than 1 years old. Cash and life insurance values are based on the current dividend interest rate of 6% from a Canadian life insurance company. This example is strictly for illustrative purposes only, the annual dividend scale is not guaranteed and values may differ.

Personalize Your Child Plan™

Request a Child Plan™ Illustration and see how much cash value your child will have for their education and for life.

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*illustrations are reflective of the annual premium amount

Have a question about Child Plan or wish to speak with a Family Advisor?