When a new baby is born everyone’s first thought is usually how adorable they are or which parent they look like most. It’s rare for education savings to be one of your initial thoughts – you have years to think about that, right?
Technically, yes, you have about 18 or so years to be exact. But let’s not forget how expensive post-secondary education can be. Add rent/residence fees, food, health care, and transportation, you’ve got yourself quite the tab built up.
There are a number of ways to start saving for this milestone. Here are 4 options we think are a great start.
1. Taxable accounts
Something as simple as a high-interest savings account or a more complex non-registered investment account are both options for saving for the future. Taxable accounts mean your money earns money while it’s in the account.
An advantage of a non-registered account is the lack of limits placed on withdrawals or contributions. When the time comes, you’ll have a lump sum of money that can be put towards education costs. If your child doesn’t end up going to post-secondary education, you’ve now got a lump sum that you can decide what to do with. Whether that means giving it to your child later in life or using it towards your own short- & long-term goals.
2. Tax-Free Savings Accounts (TFSA)
A TFSA is something many use as a means of saving for their future long-term goals. It can also be used as a way to save for your child’s education. You can take out what you need when you need it, and similar to a non-registered investment account, funds can be used for other expenses if your child decides against attending post-secondary. The big advantage? You can invest money tax-free. It’s important to make sure if you’re using your TFSA for education savings that it fits into your own financial strategy – TFSA’s have a limit to what you can contribute in a year.
3. Registered Education Savings Plan (RESP)
When using an RESP, the government provides incentives up to a specific amount for each beneficiary. To receive these incentives, you must start making contributions before the end of the year the child turns 15.
4. Teach & Encourage Kids to Save Their Own Money
Learning the concept of saving starts at a young age. Teaching your kids to save things such as monetary birthday gifts, allowance, or income from a part-time job helps them contribute to their own education down the road. It also teaches them the value of money and the importance of saving up for something. Putting away any money received through government benefits such as the Canada Child Benefit can be another way to increase their education savings.
There are several things you can do to save for your child’s education in addition to what’s mentioned above. Starting to save early and teaching your children about the significance of saving will only help prepare them for life on their own.