As a responsible parent, the best way to guarantee a stress-free future for your kids is by investing in their future financial life.
It’s no secret that every parent would want to give their children a better future.
However, finding the right way to do that can be quite overwhelming if you don’t have enough funds to take care of your children, right from birth until they become independent adults.
Thankfully, there are many ways to do that, including saving for their future education and setting up trust accounts for their future expenses.
Ways to Guarantee a Stress-Free future for Your Children
The best gift to give your children is an investment that will secure their future financial life.
Here are some of the best ways to achieve that.
1. Saving for their Future Education
The cost of education has risen steadily over the past few years, and there is no doubt that it will still rise in the future years.
That has forced many students to take out loans to finance their post-secondary education.
They graduate with huge loans to repay.
To save your kids from the stress of student loans in the future, you should start saving for their higher education early.
You can take out a Registered Education Savings Plan (RESP) for your children and begin contributing money periodically into the Plan.
An RESP is a government-sponsored savings plan that helps Canadian parents to save for their kids’ higher education tax-free.
Besides, all beneficiaries are eligible for grants.
You can read these Knowledge First Financial reviews to find the best RESP provider.
2. Setting up a Trust Account
A trust account allows you to legally transfer your investments to your kids under specific terms and conditions you’ll give.
The stakes can be in the form of money or assets like real estate property.
A trust account agreement should be well-written and signed.
Establishing a trust account is a long-term investment.
So, you need to select a reputable trustee who will safeguard your assets until your children come of age.
You must specify the year that you wish your kids should receive the assets held in a trust account.
3. Saving in a Non-Registered Savings Account
If you are looking for another savings option that has limited restrictions, you can open regular savings account for your children.
Since it’s a general-purpose savings account, it would be better if you specify the purpose of your funds.
With a traditional savings account, you can save for your kids’ future education.
Besides, you may also save for their livings expenses right after graduating as they search for jobs.
That makes the non-registered savings plan very flexible.
Unlike an RESP, a traditional savings account allows account holders to withdraw funds at any time.
That can be both an advantage and a disadvantage.
The advantage is that you can easily access the funds when there is an emergency, and the drawback is that frequent withdrawals may hurt your children’s savings.
4. Taking out a Life Insurance Policy for Your Children
Most people use life insurance to save funds for beneficiaries upon their death.
However, you can use it to invest in your kids’ future and withdraw the funds when you are still alive.
Besides, a life insurance policy allows investment to grow at compounding interests.
You can take out a whole life insurance policy that has both the Death Benefit (DB) and Cash Surrender Value (CSV).
With the DB, an insurance company will release the funds to your children when you die.
However, it’s not a reliable way to invest in your kids’ future.
Thankfully, you can use the CSV option to borrow funds from your policy without paying tax and then terminate it to get the full amount of the CSV.
In other words, you can withdraw your investment as CSV during your child’s lifetime.
To guarantee your kids a better future, you need to invest in many investment options, including opening an RESP account.
When it comes to savings, you need to specify the purpose of every money you keep, whether it’s for education or living expenses.
Most importantly, invest in an area that will fulfill your kids’ future financial needs.
By implementing these tips, you guarantee a stress-free future for your child.