4 Smart Ways to Save for Your Child’s Future
So you’re having a baby. Congrats are in order as raising a child is one of the most fulfilling jobs you’ll ever have. Along with a baby comes plenty of planning, and you’ll have your work cut out for you over the next 9 months.
Decisions will have to be made on things like which diapers and bottles to buy, child-care costs and how or if you should start setting money aside for your child’s higher education.
Having said that, let’s focus on the latter concern: how to make wise financial investments for a child’s future.
Get your finances in order
From the moment the pregnancy test reads positive, it’s best to start tying down the financial loose ends in your own life. Many money experts suggest having at least 6 months of living expenses set aside in a rainy day fund to cover unexpected costs.
Now is also the perfect time to devise a budget. Divide it into two columns: before baby and after baby. Under the first column, write down every current expense that you have, including mortgage and car payments, monthly bills, entertainment expenses and so on.
The second column will determine all estimated costs that will likely incur after the baby is born. With the numbers in front of you, it will be easier to make adjustments to your spending habits and buckle down on saving money for the future.
Tuition and fees for post-secondary education are variables depending on the education program you choose, but there’s one thing that remains constant – it can be expensive. If you’re studying in Canada, you can expect to pay an average of $6,838 per year for an undergraduate degree, and $7,086 per year for a graduate degree.
The good news is parents can begin saving early, as soon as the baby is born, to account for this cost. This includes setting up a Registered Education Savings Plan (RESP).
There are many RESP options to choose from, with plans offered through organizations like Children’s Education Funds, Inc. (CEFI). Parents, relatives or friends can contribute to a child’s RESP and the money grows tax-free for as long as it stays inside the account.
Reduce unnecessary expenses
The most important thing to remember as a new parent is that you don’t have to “keep up with the Joneses.” Between the activities, the electronics, and the elaborate birthday parties, there are always areas to cut back on. Instead of spending hundreds of dollars on a birthday party or buying a designer stroller, consider cutting back and investing the money you saved into your child’s RESP.
Involve your family
Ask your child’s relatives to consider giving “experience gifts,” such as paying for hockey camp or museum memberships, rather than toys.
They’re more memorable than toys that get lost in the mix, and you can put what you would have spent on these lessons or activities into a savings account for your child’s future.
As a new parent one thing is for sure – priorities change – and as you learn how to juggle feedings and diaper changes, you will eventually become a pro with budgeting your finances in the process.