Invest in Your Child's Success

Saving for Your Children:

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 bus for?  Below are examples on how to ensure your bundle of joy gets off to the best start: even $50 - $100/month can make a HUGE difference!!

Option #1 – Be a Financial Role Model for your Child(ren).
Pros: Your children pick up your good (and bad) habits. They get a head start from 90% of the crowd. Good, quality

Catch: Takes time and effort to learn what financial strategies work. I discovered that most of the research and innovative strategies you hear or read about, are just plain garbage. Fortunately, having an engineering background helped me to shut out a lot of this nonsense. I am happy to help give guidance on how to have conversations about money - I also recommend the following financial books - The WealthyBarber by David Chilton, The Richest Man in Babylon by George S. Calson, and Rich Dad, Poor Dad by Robert Kiyosaki
Option #2a – 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 #2b – RESP (Registered Education Savings Plan) – Scholarship Plan
Similar to Option #1 but different.  More rules and regulations – must pay monthly contributions in most scholarship plans.

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 – Whole 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.  THIS IS HUGE AND MOST DO NOT UNDERSTAND THE POWER OF THIS OPTION!
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!  

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 me if you would like to see the value of each option or learn more.



Steve MacLellan, P.Eng
The Financial Engineer
Phone: 902-240-6508
Email: steve@thefinanicalengineer.ca
www.thefinancialengineer.ca

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