When I became a father, my life changed completely. I never knew a love like what I felt for my son was even possible. I was a person who was reluctant to even have children, now I can’t imagine my life without them!

After just a few weeks of getting over the fresh, new-born smell, I immediately started investing for my child’s financial future.

So, a common question that parents ask is, “where should I put my money for my child?”

The answer to this is… “it depends.”

Before saving for your child, you need to make sure you also consider your own financial situation.

First, there is affordability. Before you think about what savings program to use, you must ask yourself: How much money can you realistically put aside for your child?

Have you put aside an appropriate amount for your own savings? Emergency fund? Dream vacation? Retirement fund?

Remember, your child could borrow for their future education, but you’ll be hard-pressed to get a loan for your retirement! Under most circumstances, a rich parent will probably not have a poor child.

With all that out of the way, let’s talk about the main places you could consider putting money in for your child.

The most common one is a bank account. This is definitely one of the worst options for growing your money over time, but at least it’s liquid so YOU as the parent can spend it all.

Generally, the top first picks would be an RESP and certain insurance programs.

RESP stands for Registered Education Savings Plan. Basically, it let’s you put aside money for your child’s future education, and the government will match 20% of the first $2500 per year up to maximum of $7200.

Not all RESP plans are equal. Make sure you contact your advisor to get the run-down on different kinds of plans. Some companies can give you additional bonuses (ie: more free money!) while others lock you in and force you to pay large penalties if you don’t continue steady contributions. Make sure you are aware of where exactly your money is going into!

As far as certain insurance programs, generally you would look for programs that offer cash values, guaranteed growth, and probably the most important factor- pay in a certain number of years. It’s doubtful that you want to pay into a program until your child becomes an adult, then at age 20, your child tells you “sorry dad, thanks for the insurance, but I’m not going to pay for it. I’d rather buy beer.”

A program that has all of these factors is great because generally at the end of the pay period, your cash value is at least around what you put into the program (so it’s as good as a bank account), but it keeps growing afterward, even though you don’t contribute any more to it. Add on to it the fact that they now have permanent life insurance that never expires “for free”, and the ability to access all of the cash at any point, possibly tax-free, and you have a winner! Again, not all programs are equal, so it’s important you make sure you talk to your advisor about which programs are best suited to you and your children.

There are many other factors to consider. Some people are savvy investors and may self-manage portfolios to bring even greater returns. But not everyone has the time or knowledge to self-direct their investments to reach the results that existing platforms bring.

If you need more clarity on specifics, or comparisons between different programs and companies, feel free to contact me!

phone: (647) 588-8879

email: alan.yu@meritrust.ca

Alan Yu, (647) 588-8879