As a parent, setting your children up for success is a priority. From education to extracurriculars, don’t forget to invest in your children’s financial future. There are many ways you can plan for the years ahead, contribute to your children’s finances, and give them the tools they need to be successful.
Here’s how to plan a brighter financial future for your children:
1. Model Good Financial Behaviour
To put your children on the fast-track to a better financial future, don’t forget where they learn their first lessons about finance. It all starts with you! You’re their first financial teacher – that’s why displaying healthy financial behaviour in front of your child is critical. Financial literacy is an essential skill that will help children manage their money throughout their lives.
Whether you’re having conversations about money around the dinner table or while shopping, there are plenty of opportunities to teach your children about finance. What advice can you give them when they get their first part-time job and earn a paycheque, pay their cell phone bill, and perhaps begin saving for post-secondary education?
Ensure you teach your children the value of saving; give them an awareness of how much things cost, and how to make informed financial decisions that will benefit them down the road. Modeling this behaviour will demonstrate to your kids how to manage their finances, which will encourage them to engage in similar behaviour.
The Financial Consumer Agency of Canada has several resources and tools to help parents increase their confidence when teaching kids about finances. Click here.
2. Open a Savings Account
Saving starts with putting money aside, whether it’s in a piggy bank or opening a bank account.
Your children may be too young to open their own savings account at a bank (if they’re under the age of 18). However, as a parent, you can open one under their name, and once they are of legal age, they can take ownership of the account (and everything in it that they’ve worked hard to save)!
Teach your kids about how a savings account works and encourage them to form smart saving habits at a young age. If they help around the house, they can not only learn lessons about responsibility but also put their earned allowance into their savings account. If family and friends gift them money for occasions like birthdays, they can add this to their savings account as well.
Bonus Tip: Your children can also benefit from interest gained on money in their bank savings account.
3. Open a Registered Education Savings Plan (RESP)
A Registered Education Savings Plan (RESP) can help alleviate the burden of your child paying for post-secondary education on their own. This plan is a tax deferred education savings plan for college, universities, and trade school.
Parents who open an RESP for their child are also eligible for additional benefits. When you open an RESP, the government may provide a Canada Education Savings Grant (CESG) of 20 per cent on contributions of up to $2,500 per year, per child. Low-income contributors may be eligible for other government benefits.
Bonus Tip: To help the account grow over time, you can ask your family and friends to make RESP contributions to mark occasions (birthdays, graduations) instead of giving conventional gifts.
4. Get Life Insurance
Another key component of a financial plan for your children is life insurance. Life insurance may be overlooked as a way to help your children financially, but keep in mind that you can get a life insurance policy for yourself to ensure your children have the financial security they need if you were to pass away.
If you wanted to pay for your children’s education or assist in supporting their lifestyle expenses, the benefit from a life insurance policy can help. Should you pass away unexpectedly, a life insurance plan can serve as a financial cushion for your children.
Types of life insurance
Permanent life insurance provides protection for as long as you need it, which means coverage for life. Meanwhile, term life insurance provides protection for the duration of a term, typically 10 years, 20 years, 25 years, 30 years or for any other period that is defined in the policy.
You can also choose between traditional and no medical life insurance. Traditional life insurance involves a lengthy application process including medical exams and tests. Your policy may not be issued for weeks. Meanwhile, no medical life insurance doesn’t require needles or medical exams, and your policy may be issued in just a few days. Convenient, reliable coverage for you, and the ones you love.
Your children deserve to have the best start in life. With your help, you can put them on the right track for personal and financial success. Consider the steps you can take to ensure they have a brighter financial future.