It’s hard to imagine that your adorable little one, with those tiny hands and high-pitched squeals, will ever be a full-fledged grownup. Although it feels far away, any seasoned parent will tell you that the time flies. While the day-to-day tasks of caring for your baby or toddler are sort of automatic, it’s easy to bump long-term planning to the bottom of your to-do list. The thing is, in order to really secure your child’s financial future, you need to start saving right now, before he or she is even out of diapers.
We know, it sounds so early, but according to Aaron Keogh, President of Greendoor Financial Inc. in Windsor, ON, “The earlier you start saving, generally, the less you need to invest, because your money will grow exponentially the longer it is invested. If you start saving the same monthly amount when your children are born versus when they turn 5, you could potentially have tens of thousands more to put towards university tuition when they turn 18.” With that in mind, we’ve outlined three accounts that will yield major benefits for your family. They’re also a whole lot easier to set up—and understand—than you might think.
Savings Account
When your child’s birthday rolls around, he or she is probably eager to tear into all of that brightly-colored paper to get to the toy inside. You, on the other hand, may be more pleased to see a simple envelope from a great aunt. Rather than spend your children’s birthday cheques at the toy store, you may want to put them away in a personal savings account for them. The benefits are two-fold. Obviously, the big-picture perk is that they will have some money to pay for smartphones, concert tickets and outings with friends once they’re older. Another plus though is that, as they get older, you can use the account to teach your kids the value of a dollar, and give them the tools to learn how to spend wisely.
RESP Account
While a savings account is smart on a personal level, you’ll likely see the biggest financial gains in a RESP (Registered Education Savings Plan). Used to fund your child’s post-secondary education (college, university, and vocational schools), it’s tax-sheltered and supplemented by the Canadian government, which matches 20% or up to $500 of an annual $2,500 contribution. With the average cost of yearly university tuition nearing $6,000 [1], that’s money your family could really use. A company like giraffe & friends, Canada’s newest innovative education savings provider, can help you set up an RESP without any hassle. They have no fees, make it really easy to understand, and they’re the only company that offers a 100% guaranteed plan, so you don’t ever have to worry about losing money. (They’re also running a contest right now where you could win a $2,500 contribution towards your RESP). With giraffe & friends, you can also set up your account quickly and seamlessly online at giraffeandfriends.com and make automated monthly contributions, all without the hassle of a representative coming to your house or having to wait for an appointment at a bank branch. Plus, if your child chooses not to pursue post-secondary education, you can roll that money into your own retirement account. Speaking of…
Retirement Account
As hard as it is to imagine your small child heading off to college, it’s probably even harder to picture yourself idling away in your golden years. The more you can put away now though, the more you’ll be able to relax and enjoy your retirement. While obviously your children will want to take care of you financially, they’ll likely have families of their own by then. Wouldn’t you prefer that they didn’t have to worry about your finances on top of theirs? If you haven’t already, you’ll want to set up an RRSP (Registered Retirement Savings Plan), which is basically an investment account with tax perks. Contributions are tax deductible and you defer the taxes until you take funds out (usually at a lower rate if you’re retired). By then, you’ll be basking in the benefits of all of your financial responsibility… and maybe even chasing around grandchildren. Yep, the time flies!
[1] Source: Statistics Canada
This post was sponsored by Giraffe & Friends
My only issue is that RESP is completely useless if your child does not got to post secondary school. With prices rising everywhere, including education, many people are beginning to opt out. That money is then useless. This happened to my sister. My parents put a lot of money away for my sister and a great majority of it was lost because of when my sister completed school and her decision to work before completing college.
A fabulous point! Not every child will want to carry on to post secondary education. I didn’t! Some other non-specific investment would be a better idea.
My understanding is that with an RESP you will always get back your original investment amount less variables such as market loss, fees, and government grants. Your sister didn’t lose money, she simply wasn’t entitled to some of the money because she was not going to use it for the agreed purposes of the plan ie; school/education.
This is pretty much what my parents did for me, with the exception of putting away our birthday and Christmas money, In their minds, we were never going to learn how to manage money if we never had any to spend. Even as a child, I never spent all the money, because I always knew that it was only on rare occasions that I’d actually have that much money in my control. It was a lesson well learned, and one I figured out on my own.