We all want the best for our children. Laying a financial foundation is a priority for many parents and grandparents. Those who have children are aware that having children and bringing them up is not cheap. Some studies estimate it to cost $13,366/year to have a child and it will cost approx. $243,656 (2011 estimate) to have a child to age 18. Staggering numbers when you think of it. That doesn’t leave much left over for education and other costs.
One of the most popular ways of setting monies aside for post secondary study and university is Registered Education Savings Plans (RESP) . For full details, see my Day 9 blog post. In short, RESP, provide a means of setting monies aside for post secondary education. The investment growth is not taxed in the parents hands and the government will provide a 20% match on the first $1500 of annual contributions.
Another common way of providing for children involves 2 insurance strategies. The most common is establishing a Whole Life Insurance plan for the child. These plans provide both lifetime increasing life insurance protection and building cash values over the life of the plan. The cash values are like a bank account and can but used for many purposes, including education, buying a home, retirement, etc.
A less common insurance strategy is establishing a Critical Illness Insurance plan for the child with a Return of Premium rider option. This provides a lifetime of major sickness protection for the child, and all the premiums will be paid out should the child not claim on the policy. It doesn’t have the same growth characteristics as a Whole Life plan or RESP, but it does provide health protection and return of premium values.
Meeting all family financial priorities is a constant struggle. Setting money aside for children needs is the best way of providing future financial stability. Budget children savings as you would any other financial priority such as food, mortgage, retirement. Instead of having grandparents or extended family providing gifts for birthdays and special events, perhaps ask for cash equivalents and use the monies to fund RESP, or insurance plans. Planning ahead helps ensure monies are effectively set aside. Even smaller amounts can grow over time. Regardless of the amounts, having financial conversations with your children as you set the monies aside will help develop good long term budgeting and savings habits for your children.
These daily financial tips are designed to be short ideas covering different aspects of family and business finances. They are short pieces intended to provide information to enable individuals, families and businesses to make informed financial decisions. Not all tips will apply to every situation, but over the course of a year, most financial topics will be covered. Check in regularly and share with friends and associates.

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