In today’s era, saving money is one of the most important tasks for everyone. No one can speculate the future, and the necessity of saving money for the future is requisite. However, the reasons for every person to save money may differ. Some people save money for retirement, while some want to enjoy vacations. Similarly, parents are concerned about saving for their child’s future.
If you want to secure your children’s future, start saving and planning in the present. In this article, you will get to know some valuable tips on saving money for children’s future. However, you can learn more about Child Plan in Canada by visiting this page!
Consider the future requirements of children
Before any financial plan, make sure to examine and appraise the requirements of your children. It is a primary step that helps to make a better financial plan for the future. After examination, you should pursue the objectives based on the requirements.
Every child has distinctive future requirements or expenditures. After evaluating all the expenses, make sure to choose the right saving plan as per the needs of children. In this way, your children can begin a better life in the future.
Here are a few possibilities to explore for your child’s education:
1. RESP education fund
Parents looking for authentic savings plans to support their children’s educational requirements often opt for RESP. Given that the government of Canada sponsors this plan, it would be an excellent decision to invest in the same. RESP subscribers can contribute, and the accumulations would be free from tax when you make the deposit.
Besides, the government also chips in with a particular portion of these schemes for children under 18. This is known as the CESG, which was added in 1998, whereas RESP was launched in 1972.
Here are some of the key features of the RESP fund parents you should know.
- Combining all the RESPs, the government of Canada has capped the lifetime limit of contribution to RESP to $50,000 for each beneficiary.
- If your child does not study one of the approved post-secondary programs after receiving the grant within three years of opening the account, the Canadian government would claim the amount back.
- Income tax and penalties would be applicable to the investment earnings you withdraw from an RESP without being used for a vocational school or college.
Parents need not pay the tax when they deposit the money, thereby making a substantial saving.
2. Canada Child Benefit (CCB)
Canada Child Benefit (CCB) is a plan that can significantly ease up the financial pressure on qualifying families for their child’s upbringing. Through this scheme, you would receive monthly payments, free from tax from the Canadian government. This would help you make up some expenses.
The government would weigh several factors like the size of the family, household income, and the territory or province before granting the benefit. It is easy to apply for this financial assistance, and the process works fast.
Let’s take a closer look at some of the benefits parents can enjoy through the CCB.
- In 2016, this particular scheme replaced the CCTB (Canada Child Tax Benefit). This was done to ensure that the lower-income families had more money available to spend on their children.
- Families with children under 18 years of age can receive a monthly tax-free payment in the form of the CCB. The CRA (Canada Revenue Agency) hands over the funds to the families. However, the parents who receive this amount need not include it in their IT returns.
- In case you qualify, the payments received might come with extra benefits for the kids. This might include a disability benefit for your child, as well as territorial and provincial benefits.
If your AFNI is not more than $32,028, you would be eligible for the following benefits.
Kids under six years would receive $569.41 a month, amounting to $6,833 a year. For kids aged between 6 and 17, the government has come up with a provision of $480.41 a month. This would amount to $5,765 a year.
Eventually, you can receive significant support to raise your child from the government of Canada through the Canada Child Benefit (CCB) scheme. Please note that only members of low-income families in Canada would be eligible for these benefits.
- Participating Entire Life Insurance Plan
Child Plan is the fastest-growing participating whole life insurance plan. However, it is not a government program. Both parents and children can choose their educational path under this insurance plan. Unlike RESP, Child Plan helps human beings to provide tax-free transfer of the plan for the children.
In this context, here are some points to consider:
- Make sure to have the extra money in your account to reduce the deficit risk.
- Generally, a Child Plan is known as a 20-year plan.
- One of the most significant advantages of the Child Plan is that parents can request to terminate the deposits after 15 years.
- Also, parents can avail premium holiday for one year after the four years of the Child Plan.
Also, you can deposit on a monthly or annual basis with Child Plan. If you pre-fund this plan, you may also get up to a 25% discount on the entire investment. However, you can also discuss it with your family advisor before investing.
Apart from the above, you can take measures like;
- Opening a savings account in your child’s name
- Purchasing real estate in your child’s name
- Planning corporate dividend
Well, investing some money as saving for a child’s education is an ideal choice. The government of Canada provides you with ample opportunities to save for your child’s future. Make sure you have a fair idea of all the available options before choosing one or making an allocation. Talking to an expert would help you make informed decisions in this regard.