6 Ways to Invest for Your Children's Success! (There's more than RESPs)

June 14, 2017

Congratulations!!! Welcome to parenthood! Everyone reacts differently to this phase of life. We were shocked by how much unconditional love we had for our children when they entered the world – who else would you throw yourself in front of a bus for? When Rowen, our first born arrived, we unwisely threw $10K into a scholarship RESP out of pure emotion. 5 years later that $10K is now $9373 due to fees and charges. I’m writing this article so you don’t make the same mistakes we made, and to ensure you that there are several ways to save for your child’s success, even if post-secondary school is not in the cards. If you are lucky enough to have $10k, there's a better way to invest than we did, but even $50 - $100/month can make a HUGE difference!!

Option #1 – RESP (Registered Education Savings Plan) – Growth Plan

Pros: Government matches 20%, 30% or 40% and investment can take advantage of compound growth.

Catch: Grant can only be used for post-secondary education – you child must use it or lose it! Also, your child has control of funds when he/she goes to post-secondary school (do you remember what you were like your first year of University?)

Option #2 – RESP (Registered Education Savings Plan) – Scholarship Plan

Similar to Option #1 but different.

Option #3 – TFSA (Tax Free Savings Account) – Must be in Parent's Name

Pros: Investment can take advantage of compound growth, Tax Free!

Catch: Limited amount allowed each year. Must be in parent's name. Easy to access, so it might be used for emergencies or other events.

Option #4 - Open Market Investment Loan

Pros: Initial investment uses the power of compound growth. Interest is tax deductible.

Catch: Approval needed. Capital Gains are taxed.

Option #5 – Universal Life Policy (An insurance policy wrapped around an investment)

Pros: Child can be insured for life. Investment can grow into a retirement fund. Can borrow tax free.

Catch: Approval Needed. Monthly premium must be made until there is cash value in the policy.

Option #6 – Critical Illness Insurance with Return of Premium Policy

Pros: Lump sum payment will be given if child becomes sick. The lump sum payment is meant to be used to get better, but it can be used anyway you would like – grant a wish, pay bills, etc. Return of investment is guaranteed if you don’t make a claim (which hopefully you won’t have to).

Catch: Approval needed. Monthly premium must be made every month. No compound growth.

Now you know your options!! You have a better chance of success if you understand how to be successful! With that said, knowledge is only potential power, it’s not what you know, but what you do. And, it’s not necessarily what you do with your knowledge, but what you do well and eventually master that guarantees success.

If you were to invest $100/month and obtain a 6% rate of return, you’d be surprised by the value of each option after 15 years. Contact us if you would like to see the value of each option or learn more.

If you'd like to learn more or discuss how to get your child's path to success started, contact Steve MacLellan at 902-240-6508 or smaclellan02febc@wfgmail.ca