How to Save for your Child’s Education? Here are the 5 Smart Ways

| August 19, 2019 | 4 Comments

Most parents in Canada know about Registered Education Savings Plans. However, it doesn’t essentially mean that they have them. On the other hand, only a few are aware of the RESP alternatives of saving for their little one’s tuition. With post-secondary education costs rising and the job market looking depressing, the young adults are more likely to finish their schooling burdened with significant amounts of debt. Hence, as a parent, you need to get smart ideas for putting money aside for your child’s education.   

RESPs are one of the most popular ways for parents to save for their children’s high education. Money places into such investment accounts can grow tax-free. In this post, we will discuss how parents can maximize their Registered Education Savings Plan contributions and the other ways to save.

How to Save for your Child’s Education? Here are the 5 Smart Ways
School supplies

How to Save for your Child’s Education? Here are the 5 Smart Ways

#1 Get Life Insurance

Parents can use life insurance to fund their kid’s education by making regular investments into a life insurance policy and tapping into excess cash value. The benefit of getting life insurance is that the amount saved would be tax-deferred inside the life insurance policy. However, it is not advised to break into the excess cash until the policy is matured; else you will not get the full benefit. Even in parents are struggling, grandparents can tap into their policy to manage the cash flow.    

#2 Pay Out Corporate Dividends

If you have an incorporated family business or if you are incorporated, you could accumulate savings in your corporate account, and at a later date, you can pay them out to pay for your child’s education. However, for this to happen, your children would require owning shares of your company, who will have ostensibly low income. This is a great way to support your children’s post-secondary education and can benefit your RESP contributions as well.    

How to Save for your Child’s Education? Here are the 5 Smart Ways
4 pink piggy banks

#3 Set Up a Trust

A trust is a legal agreement, like a Will, where funds are transferred from one individual to another based on specific terms. Setting up a trust is a great way to control, manage, and protect funds. The biggest benefit of having a trust is that it gives a grandparent or a parent the peace of mind with the fact that the money will be used for its intended purpose – like for the grandchild’s or child’s post-secondary education and other higher studies. However, it is critical to set up a trust in the right manner with a written agreement outlining the terms and conditions.     

#4 Use Tax-Free Savings Account (TFSA)

Using a Tax-Free Savings Account will allow parents to build up their savings tax-free. The best, they can withdraw the money any time in the future to help finance their children’s education.

How to Save for your Child’s Education? Here are the 5 Smart Ways
How to Save for your Child’s Education? Here are the 5 Smart Ways

#5 Open a Non-Registered Account

Opening a non-registered account is easy, especially when it comes to the purpose of saving for your child’s education. Such type of account is easy to set up, offers flexibility, and simple to understand. You can withdraw the funds at any time.

Final Words

It is critical to research the possible investment options available that suits your financial portfolio. You can help your child build a bright future with proper education.   

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Category: Finance, Living, Tips, Weekly Themes

About the Author ()

Lyne is a Certified Infant Massage Instructor (CIMI), Certified Professional Wedding Consultant, and an Event Planner. It has always been her dream to create a website dedicated just for Moms since her children were young. Thus, after 10 years, she finally accomplished it, and the Ottawa Mommy Club was born in May 2011. She loves all things Disney and is an avid chocoholic. She was also the Queen B of the BConnected Conference, Canada's Digital Influencer and social media Conference in Ottawa and Toronto. She coordinated the Annual Infant Information Day/Early Years Expo for the City of Ottawa for 8 years. She was also the co-chair of the Navan for Kraft Hockeyville 2009-2011 committee that organized five community events within 6 months, and helped Navan reach the top 10 finalists in Canada. In April 2011, she received the City of Ottawa Mayor's City Builder Award.

Comments (4)

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  1. micheline says:

    Thank you for the options for education saving, I kinda like the idea of using the Tax-Free Savings Account (TFSA).

  2. Elizabeth Matthiesen says:

    Unfortunately further education is costing more and more each year and it is now absolutely necessary to save in advance for the cost. These are very good tips and will no doubt help those who are just starting out on the journey. They do say that the cost of bringing a child up is as much as the cost of a house!

  3. Calvin says:

    Interesting methods, I have heard of only some of these. Thanks for sharing these.

  4. Debbie White-Beattie says:

    Everything is so expensive today and saving for kids schooling has got to be hard

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