Every parent wants to ensure that their child lives a stable and worry-free life. But as we face more and more uncertainties each day, securing your child’s future can become an overwhelming task. For this reason, you have to do your due diligence and act early in order to make sure that your child doesn’t get left behind down the line. So, in this post, we’ll discuss some of the best ways to help you secure your child’s future — no matter your budget.
Consider Opening a High-Yield Savings Account
One of the best ways to teach your child about personal finance is by opening a savings account in their name. However, you can take it one step further and open a high-yield savings account for them, which will allow their money to grow exponentially over time. Compared to traditional savings accounts, which usually only have an annual percentage yield (APY) of 0.05%, you can find tons of high-yield savings accounts with APYs ranging from 1.5% to 1.75%. The main reason why high-yield savings accounts can offer such high APYs is that they are often offered by financial platforms, usually in a bid to dissuade customers from supporting large banks.
Start a Registered Education Savings Plan (RESP)
If you want to save up for your child’s education, nothing beats starting an RESP for them. Simply put, an RESP is a tax-preferred savings plan that’s meant to encourage parents to save for their child’s post-secondary schooling. With an RESP, you have a maximum lifetime contribution of $50,000 per child, while the government matches 20% of what you put in every year. This means that your child’s education funds can get an additional $7,000.
Another benefit of RESPs is that you can potentially save tens of thousands of dollars on taxes. Canada incentivizes families who want to pursue higher education and their parents, by providing them with tax breaks. To make sure that you don’t miss contributing to your child’s RESP, you can automate your contributions and authorize direct deposits from your payroll account.
Buy Your Child a Life Insurance Policy
Having a life insurance policy for your child ensures that they’re covered for life. Aside from having death benefits, you can also grow an investment in a life insurance policy as it has a designated tax-advantaged environment and compounding interest. It is advised that you should buy a whole life policy for your child in order to maximize its benefits. Whole life insurance policies are made up of two components: the death benefit and the cash surrender value. Simply put, the death benefit can only be claimed when the policyholder dies. But if you choose to get a cash value policy, the policyholder can borrow from the policy tax-free or terminate the contract to get the cash surrender value.
When saving for your child’s future, it is key that you act as early as you can. So if you want to ensure that your child is prepared for what the future may bring, be sure to follow the steps we’ve listed above.
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