There’s no denying that having kids is expensive, with parents spending tens of thousands of dollars per year on expenses like housing, food, transportation, healthcare, education, entertainment, clothes, and more. And, many parents want to make sure that their child is able to enter adult life with some financial security behind them, adding saving for their child’s future education and living expenses as a young adult to the total sum. Whether you are currently trying to have a baby or want to start saving for your young child’s future as early as possible, putting aside money on top of all the other expenses that come with having a child can be overwhelming. So, what are some of the best ways for current or future parents to start putting money away for their little one’s future?
Open a Specialized Account
One of the best ways to put money aside for your child’s future education is with a registered education savings plan (RESP). These saving plans work in a simple way as regulated accounts that are designed to be used for saving money for your child’s university or college education. They are tax-advantaged and can be invested in many different ways if your child decides not to pursue a degree. Anybody can open an RESP on behalf of a child, so it’s also a good idea if you want to help contribute to the educational savings for your grandchild, niece or nephew, a younger sibling, or a close friend’s child. RESPs can only be transferred to a sibling and all you need to be able to open one on behalf of a child is Canadian residency.
There is also the option to open a family RESP, which is restricted to parents and grandparents only and can be spent on the education of all the children in the family. Learn more about the types of registered educational savings plan available and how to set one up at Wealthsimple. Wealthsimple offers a lot of advice on savings, investments, and more for growing your wealth and putting aside money for the future.
Understand Your Cash Flow
Having a solid understanding of your own cash flow is one of the most important aspects of saving for your child’s future. Understanding how much money you are bringing in and paying out on a regular basis is key to making informed decisions about the expenses that you want to continue paying for, where you can cut back if you want to increase the savings that you are putting away for your child, or budgeting for a new baby. Understanding your own spending behaviors and habits makes it easier for you to make better financial decisions for yourself and your family. And, there are several great online tools that you can use to make more sense of your budget and spending habits.
Consistency is Crucial
When it comes to understanding your cash flow and tracking your savings, it’s important to keep up with it on a consistent basis. Consistently monitor your spending habits and your saving goals each week or month and regularly look for ways to improve your financial situation. And, be consistent when it comes to putting money aside for your child’s future, even if you can only afford to put a small amount aside each month. Small amounts certainly grow over time, so set up an automated payment into your child’s saving account each month from as early as possible and treat it like you would any other regular expense.
Keep it Separate
Setting up a savings account that is completely separate from your own savings account or the other bank accounts that you use on a regular basis is key to making sure that the money for your child stays in the account where it belongs. High-interest savings account are an ideal choice as the higher the interest rate, the more money you will earn on your child’s savings over time. Savings accounts with online access that you can give a meaningful name to have been shown to help parents create an emotional connection with their child’s future money that motivates them to keep on saving.
Along with putting a predetermined amount of money aside in your child’s savings account or registered educational savings plan, it’s worth considering how micro-saving could work for you. Micro-saving is an ideal option for many people since it is all about making the pennies work harder, and saving up small amounts of money on a regular basis that will grow over time. There are many bank account options that can help with this, such as features that allow you to round up the cents each time you spend and putting the extra into a separate part of your account; you might want to consider this option and transfer the money that you round up each month to your child’s account to boost their savings. Some people find that saving a dollar or even less per day is an ideal way to save money without feeling like they are losing out on a huge amount.
Sell Items You No Longer Need
One of the main reasons why kids can be so expensive is that they’re constantly growing. As a parent, you’re always having to replace clothing, items, accessories and other things that your child has grown out of. While making a profit on baby items that you bought brand-new isn’t always possible, things like the expensive car seat that your child has become too big for or the crib that is no longer kept in will always be in high demand. More and more parents are turning to buying second-hand on sites like eBay or Facebook Marketplace to keep the cost of parenting down, and you can use this to your advantage. Since the number of babies born tends to increase throughout the spring and summer months, these are the ideal times to sell those baby items that your child has grown out of like the crib, stroller and car seat. You can put the money that you earn towards purchasing new things for your child as they grow, or add it to their savings account.
Consider Employment Perks
Some employers will offer perks and benefits that can help your efforts in saving for your child. Take a look at what your employer offers to see if there is anything available that you could take advantage of to help your child’s future savings grow. For example, you might be able to get discounts on essentials like daycare, helping you save money that you can put aside for your child instead. If your child is older, some employers might be able to help you get discounts on things like laptops and school supplies.
If your child is very young, it can be worth asking friends and family members to purchase essentials as gifts for them on birthdays or during the holidays, or even better, offering money instead that you can pay into your child’s savings account. Many family members are happy to help out with some big expenses and some might be willing to make regular payments into your child’s future savings account as a gift to them.
Find Discounts and Cashback Options
There are tons of expenses that come with having a child, but the good news is that there are lots of opportunities to earn discounts or cashback on those essential purchases. Spend time shopping around each time you need something new to try and find the cheapest option. Use cashback sites to earn money back on essential expenses like your utility bills, insurance, and regular shopping, and put the difference aside for your child or use it to make essential purchases for them as they are growing up.
Teach Your Child About Money
Finally, as your child gets older and you continue to save money on their behalf, it is important to teach them good money management skills and set them up for success in the future. Children can really benefit from getting involved with money as early as possible with many strategies that you can use to teach them the value of money, how to budget, and set realistic expectations. For example, you can get prepaid cards that are specifically designed for kids, or help your child open their own savings account that they can use to stash their pocket money and save up for new toys, games, pets, trips, and other things that they might want. Some parents find that their child benefits from learning about the idea of working for their money by helping out with chores around the house for pocket money, which helps to set them up for working life and budgeting in the future. The steps that you take now to help your child improve their money management skills and become financially literate will ensure that, once they get access to the savings you’ve put aside for them, they will use it wisely.
Raising children can be one of the biggest yet worthwhile expenses you’ll ever face. Making sure that your child gets a good start in life is essential for many parents, and part of this is putting aside money for their future education.