3 ways to set your kids up for financial success
The kids are back in the classroom and leaves are starting to turn — change is in the air. Now is the perfect time to start a new season of planning for your kids’ financial future.
These three essential steps will help you set your child up for success in their financial lives and beyond.
Maximize your education savings
Investing in your child’s education may seem like a no-brainer, but there are a few ins and outs that aren’t so obvious. Now is the time to tackle them.
First things first: open a Registered Education Savings Plan (RESP). You can do this as soon as your baby is born, but any time works. The sooner, the better. When you invest money in an RESP account, your returns grow tax free. Not only that, but if you put money into your child’s RESP, the government will too. That’s free money!
To make the most of these grants, you should strive to contribute $2,500 out of your own pocket each year for 15 years — that’s $208.33 per month.
Don’t have the cash? It’s still worth opening an RESP so that you can easily contribute any money that does come your way. A cash gift from relatives here, a bonus from work there. It all adds up.
Teach your kids about money early
Kids who learn financial skills early on will keep those habits for life. Don’t make the mistake of assuming that your kids will naturally pick up money smarts as they grow up.
This school year, start practicing money management in the same way you would practice reading and writing skills at home.
Let them learn by doing. Allowing your child to control their own spending early on will let them experience first-hand how quickly money can disappear, how saving works, and how your earning money depends on exchanging value.
For example, I don’t give my daughter a scheduled allowance, because just handing her money doesn’t teach her anything. But I do pay her for certain chores. Letting kids earn their own money teaches them that it doesn’t come from the bank of mom and dad.
Once kids have their own money, they need to learn how to save and manage it, not just spend it. Work with your child to divvy any money they receive into three buckets: saving, spending, and giving. My daughter’s spending and giving accounts are simple piggy banks, and we’ve opened a savings account with the bank that she can access on an app.
Delayed gratification is a key concept here. If a child wants to buy something beyond the basics you provide, suggest they pay for it themselves and help them start saving for it.
They’ll learn that if they put away a portion of any money they get, they’ll be able to afford something bigger in the future.
Volunteering together as a family will help your child learn the value of doing things for others and expecting nothing in return. And doing nice things for other people just feels good!
Contact your local volunteer centre or neighbourhood charity to find out about volunteer opportunities for your family. You could help serve food at a soup kitchen, play cards with senior citizens, walk dogs at your local SPCA, and more.
It’s a win-win situation. While they’re volunteering, your child will gain experience they can put on their resumé. And while their working days may seem years away, a strong history of volunteering helps set new grads apart as they enter the job market and advance in their careers. In fact, high earners are more likely to be volunteers, according to Statistics Canada.
Your child will also pick up a few practical skills along the way. Basic skills like how to be on time, follow instructions, troubleshoot problems, be accountable to others, and develop positive working relationships will carry with them for life.
Volunteering together while your kids are young is the best way to ensure they’ll develop these life skills early, learn the value of goodwill toward others, and create a rewarding habit of giving that they’ll keep for a lifetime.
Ready to invest in your child’s future? Open a WealthBar RESP today.