When you're a parent, you're often thinking about different ways to save money while still being able to meet the many needs of your children. This can be incredibly challenging, especially when money is tight.
Fortunately, in this article, we'll review some strategies for saving for children. These include saving what you can, starting now, opening up certain types of savings accounts, and more.
Save What You Can
When you’re saving for children, you need to save what you can. To do this properly, there are three strategies you need to follow. These include giving yourself room to grow, ensuring that the amount fits your budget, and considering your child’s needs.
Give Yourself Room to Grow
When you’re deciding how much to save and on what to save costs, it’s important that you give yourself room to grow. In addition to saving to serve your short-term needs, you also need to think about how you can save toward your long-term needs.
Ensure that the Amount Fits Your Budget
It’s also important the amount you start to save fits your budget. The last thing you want is to be saving so much that you end up having to cause yourself or your family to struggle. When you save, you still need to ensure that you’ll have the money you need to spend on yourself and your family.
Consider Your Child’s Needs
You should also consider your child’s needs so that they are sufficiently met. Even though your goal is to save money, you shouldn’t cut back so much that your child isn’t receiving a good education or is experiencing negative effects on their wellbeing.
Start Now - There’s No Time Like the Present
When it comes to investing and saving, there’s no time like the present to get started. The sooner you start saving, the more time your money will have to grow. Some strategies you can use to do this include depositing small amounts now and learning about different ways to grow your money.
Deposit Small Amounts Now
Instead of waiting until you have a large amount of funds saved up, you should deposit small amounts now. You can do this every month or every week. This will make it more likely that you’ll start immediately, and it will also ensure that you’re saving regularly.
Over time, these amounts will add up. Additionally, they’ll have the time necessary to grow.
Learn About Different Ways to Grow Your Money
Another way to start saving from the very start is to learn about different ways to grow your money. Because you have more time by saving for longer, you can use these strategies while riding out the market’s ups and downs.
Open an RESP
The good news is that you don’t have to save your money all on your own. You can add to your savings with the grants available through the Canada Education Savings Grants. To have access to these grants, you have to open up an RESP (Registered Education Savings Plan).
One of the best things about this type of savings plan is that the growth is tax-deferred.
Open a TFSA
It’s smart to open up a TFSA (Tax-Free Savings Account), as well. The growth is also tax-free, like with the RESP account. Additionally, you can withdraw any of these savings for any purposes and this withdrawal would be tax-free.
Have a Plan in Case They Don’t Go Off to University
Even though opening an RESP will help you save, these savings generally must be used for paying for education programs that are post-secondary and that qualify. For this reason, you should have a plan in case your children don’t go off to university.
One thing you can do is to combine opening an RESP with opening up a TFSA. This way, you’ll have some money saved up in case you can’t use the RESP money to support your child going off to university.
Additionally, you can build cash value and meet two different needs simultaneously by signing up for a permanent life insurance policy.
If you need to, you can always tap into this policy later, but you’ll also have the option not to.
Educate Your Kids About Money
It’s also important to educate your kids about money. This way, as they get older, they’ll know how to manage finances even when they aren’t living at home. As they start their own families, this will also be helpful to them when it comes to saving for children and teaching their children about finances.
In our article, Financial Literacy for Kids, we review some of the best ways you can educate your kids about money. We’ll cover some of these now.
Start Your Children Off Early
By teaching your children about money from a young age, you can make it easier for them to understand finances instead of having a fear of dealing with them. This will be encouraging for them later on when they start opening up bank accounts of their own.
One of the best ways you can do this is by playing money-related interactive games with them.
For example, you can play dress-up with your children, having them pretend to have different occupations. When they do this, you can explain how jobs work, what they are, and what they would have to do to get them.
You can also play an imaginary game where they have an imaginary restaurant.
They can set prices and you can have your own budget, which you can use to explain how you have to create your order based, because of the maximum amount you can spend, on how much money you have.
Demonstrate How Important Giving Is
It’s also important, when teaching your kids about money, that you demonstrate to them how important giving is. Being generous is good for us, and there are so many causes to donate to, such as impactful philanthropies, conservation projects, and political campaigns.
Whether you’re teaching your child to give to one of these causes or showing them how wonderful it can be to buy a gift for a close friend or family member, this can also help them understand the positive power money has.
They’ll be more excited, too, to save, so they can put money toward donating or buying something for someone who really matters to them.
Explain How Wise Spending Works
One of the most important things to teach your child is spending wisely. A big part of this is teaching them the concept of delayed gratification. Sure, maybe there’s a product that’s trending right now. But they don’t actually need to have it simply because everyone else does.
You should also explain that different items cost different amounts. Sometimes, an item that lasts longer might actually be a better choice because it’s high quality—even when it might be pricier.
If you’re with your teen at the mall, this is also a good chance to talk to them about fun purchases they can make occasionally.
Sure, they can buy a shirt or fancy coffee, but it’s important not to make a big habit of it, as this could make saving money more difficult.
Teach Your Kids Through Your Own Actions
One of the most important ways of teaching your kids about finances is by setting a good example. Do this by paying off your debt, saving money, and creating your own budget. If you aren’t yet financially literate, you can take a free course, for example through Coursera.
Don’t have time to complete a course? Then you can always listen to a financial literacy podcast.
To show your kids how to budget, sit down with the whole family and work out a budget. Include items such as eating out, groceries, bills, and pet supplies, calculating how much you’ll plan to spend on them every month.
Speak Openly with Your Children About Money
No matter how old your children are, speak openly with them about money. There are easy ways you can work this topic into a conversation in a way that’s non-threatening and natural. For example, you can remind your children of your restaurant budget for the month when eating out.
This way, they can compare different items on the menu and talk about how different selections will have an effect on the budget.
Additionally, if you’re currently struggling financially, be open with your kids about this. Let them know that this is the reason why there are certain things you can’t afford.
However, remember that there are many ways you can have fun for free, like having a staycation.
Act Like a Creditor for Them
When you’re a parent, something you’ll do quite often is lend them money. A lot of the time, parents won’t ask for their money back. However, once your children start working, this is an opportunity for you to educate them by acting as their creditor.
Offer financial help if they’re looking to buy a large purchase, as long as they’ll pay you back.
Then, sit down with your child and create a monthly payment plan, where you’re clear about what amount they’ll pay you every month.
Best Savings Accounts for Kids in Canada
According to Million Dollar Journey, the best savings accounts for kids in Canada include Scotiabank’s Getting There Savings Account, CIBC’s Advantage for Youth account, and Tangerine’s Children’s Savings Account.
Scotiabank’s Getting There Savings Account
Kids who are 18 or younger can open this free account at Scotiabank when they visit the bank. There are tiered interest rates, which are based not on the balance but on the deposit. Deposits less than $500 have an interest rate of 0.05%, and those higher have one of 0.10%.
This account includes Interac e-Transfers and debit transactions (these debit transactions are unlimited).
CIBC’s Advantage for Youth Account
When it comes to CIBC’s Advantage for Youth Account, kids who are 18 and under can get a free savings account that comes with the useful features that come with a chequing account. This account includes a 0.05% interest rate, unlimited Interac e-Transfers, and unlimited transactions.
Your child will get all this at zero cost, as there isn’t a monthly fee. They’ll also get a free membership to SPC, which will save them $10 every year and potentially more through student discounts on services and goods.
Tangerine’s Children’s Savings Account
This is a great savings account for children, as it’s free, has an interest rate of 0.20%, and offers unlimited Interac e-Transfers as well as unlimited transactions. However, for your child to have this account, you first have to open up your own chequing account with Tangerine.
Looking for More Saving for Children Strategies?
Now that you’ve learned about how you can start saving for children and begin your children’s future now, you might be looking for more ways to save. Maybe you want to learn about how to save for college or how to choose insurance plan for your children.
Whatever information you need, we can help. Insurdinary.ca is an all financial resource company which offers both digital and human interaction methods
To learn more about how we can help you and your family save, contact Insurdinary now.