Learn how to save for a child's education
By Michael Demner
It's never too early to start saving for your child's education. Here are a few tips on how to get started.
Start with a savings account
A savings account is a great place to start when saving for your child's education. You can set up automatic transfers from your checking account to your savings account so you're automatically saving each month. This money can be used for anything related to their education, from tuition and books to living expenses while they're away at school. Many banks offer special savings accounts for children with higher interest rates than regular accounts.
Invest in a RESP
A Registered Education Savings Plan (RESP) is a special type of savings account that offers tax breaks to encourage Canadians to save for their children's post-secondary education. The government will also contribute a grant of up to $500 per year per child into a RESP, depending on family income.
Guaranteed Investment Certificates (GICs) and Bonds
GICs and bonds are both low-risk investment options that can be used to save for your child's education. With a GIC, you agree to deposit money for a set period of time (usually between one and five years) and earn interest on your investment. With a bond, you loan money to the government or another organization and receive periodic interest payments over the life of the bond (usually 10 years). Both GICs and bonds can be cashed in before they mature, but you may not get all your money back if you do this.
Mutual funds are another option for investors who are looking to grow their money over time. With a mutual fund, your money is pooled with other investors' money and invested in a variety of assets such as stocks, bonds, and cash. Mutual funds come with various levels of risk, so be sure to speak with a financial advisor before investing in one.
Purchasing stocks is another way to invest your money to grow over time. When you buy a stock, you become a part-owner of a company and are entitled to a portion of its profits (if any). However, stocks are also risky because their value can go up or down, and you could lose money if the value of the stock falls.
Cash back rewards
If you use credit cards, be sure to use ones that offer cash back rewards. You can then use those rewards to help pay for your child's education.
Save your extra money
Any extra money you have should be funneled into your child's education fund. This could include things like bonuses, tax refunds, or even just extra cash from your budget.
No matter which savings method you choose, the important thing is to start saving now for your child's future education!
Finally, check out our investment returns calculator to see how your savings could grow using different investment vehicles!