First child

Preparing for parenthood: Providing your children with financial security

Expanding your family is a beautiful occasion, but it also comes with new responsibilities, particularly financial ones with the skyrocketing costs of essentials for children and daycare. As you prepare for this new chapter, it’s important to think about securing your child’s future as well as your own. This can include planning for their education, ensuring your family’s financial stability, and setting up a safety net for the unexpected.

To help kickstart your decision-making for the best possible financial foundation for your growing family, here are some tips:

1. Opening an RESP early: Investing in your child’s future

Planning for your child’s higher education is important, and opening a Registered Education Savings Plan (RESP) early is a key step in making that happen. An RESP is a tax-deferred savings account designed to help parents save for their child’s post-secondary education, up to a maximum of $50,000 per beneficiary. The earlier you start, the more time your money has to grow.

The Government of Canada also offers incentives to encourage saving through RESPs, such as the Canada Education Savings Grant (CESG). The CESG matches 20% of your annual contributions up to a maximum of $500 per year, with a lifetime maximum of $7,200 per child. This means that by contributing just $2,500 a year, you can receive an additional $500 from the government, significantly boosting your savings.

Starting an RESP early allows your investments to benefit from compound growth over time, which can make a big difference by the time your child is ready for college or university. Even small, regular contributions can add up to a substantial amount when combined with government grants and tax-free growth within the account.

2. Life Insurance for parents: protecting your family’s financial future

For parents, life insurance is important because it ensures your family is protected financially if something unexpected happens to you.

Life insurance can cover a range of financial needs, including:

• Replacing lost income: If something unexpected happens to you, life insurance can help replace the lost income, ensuring that your family can maintain their current lifestyle.
• Paying off debts: Life insurance can help pay off debts such as a mortgage, car loans, or credit card balances, so your family isn’t burdened with these expenses.
• Covering education costs: Life insurance can provide funds to cover your children’s education costs, ensuring they have the resources to pursue their dreams.

Two of the most common options for life insurance are term and permanent. Term protects you for a set period, and this can coincide with the years when your children are financially dependent on you. It is often more affordable at first, but the premiums will increase at every renewal. Permanent offers lifetime coverage and is typically more expensive but has steady, guaranteed premiums.

3. Life insurance for kids: Lower premiums, better insurability

One of the primary benefits of life insurance for a child is the lower premiums. Because children are young and typically very healthy, life insurance policies for them are generally much more affordable than they would be later in life.

Another advantage is insurability — by securing a life insurance policy for your child now, you guarantee that they will have coverage in the future. This can be especially important if your family has a history of medical conditions that could make getting life insurance more difficult or expensive as your child gets older.

Many policies also offer the option to transfer ownership to the child when they reach adulthood. At that point, they can continue the policy, benefiting from the low premiums, or use it as a foundation for their own financial planning.

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