How To Plan For Your Child’s Financial Future

Written By Alla Levin
February 21, 2022

How To Plan For Your Child’s Financial Future

Becoming a parent is one of the most crucial moments in one’s life. It brings a sense of responsibility and maturity. At the same time, it also brings the responsibility of securing your child’s financial future.

Securing a child’s financial future is a huge challenge that takes careful planning and a strong commitment. Unfortunately, most parents often ignore the importance of their financial stability. Preparing your children for the future is a significant concern as a parent.

Don’t forget to make financial investments in your children’s future, whether it’s through Insurance For Children or investment contributions. There are numerous methods to plan for the future, contribute to your children’s financial well-being, and succeed.

Financial planning ideas for your child

If you are worried about your child’s financial future, here are some ways to start saving for them.

Non-registered savings accountschild`s financial future

As the name suggests, a non-registered savings account is not registered with the government. These are investment accounts offered by banks and financial institutions. Opening and managing a non-registered savings account is a simple process. They also offer a lot of flexibility. Capitals gains from a non-registered savings account are taxed at 50% of your marginal tax rate.

A non-registered savings account can be opened only if you are above 18 years. It can be used in conjunction with other investment accounts. This account does not have a contribution limit. Thus, it can come in handy when you have exhausted the limits of your RESP or TFSA account.

You can withdraw funds at any moment to cover unexpected expenses. Even if your child grows up and becomes an adult, you can still have authority over the account.

Tax-free Savings Account (TFSA)

A TFSA is an investment option provided by the Canadian government which can be used to make tax-free earnings from contributions. The contribution room determines the contribution limit available. For 2021, the contribution room was $6,000. You can make investments in mutual funds, bonds, guaranteed investment certificates, or cash.

You can make withdrawals at your convince anytime. However, such withdrawals would not reset your contribution room.

Open a trust account in your child’s name

A trust is a legally binding agreement that permits you to provide money to your child. Your child’s age and how the funds will be used are both considerations. A trust account ensures that your funds are used for their intended purpose. When opening the trust account, make sure you sign a legal agreement stating how your child will inherit your assets. It’ll keep them from abusing the funds set aside just for them.

Most parents find it hard to make a long-term decision like setting up a trust account for their kids. By the time they receive it, your investments will have grown in value. Unfortunately, some kids are too careless to mismanage their parents’ trust funds. Here’s what you can do to safeguard your investments:

  • Distribute assets in incremental steps as the youngster matures and grows.
  • A trust account provides liability protection for the assets throughout a child’s life.

Registered Education Savings Plan (RESP)

Post-secondary education is increasingly expensive, needing a low-cost savings plan like an RESP. According to Statistics Canada, the average annual increase in undergraduate tuition prices is 3%. The Registered Education Savings Plan (RESP) is a way for Canadian parents to save for their children’s higher education.

An RESP account is easy to open and can stay operational for 35 years. You can make contributions for 31 years in the account. You can choose between an Individual RESP, Group RESP, or Family RESP based on your family’s need and size.

The Canadian government also provides grants equal to 20% of the parents’ contribution, up to a maximum of CA$2,500. As a result, all RESP beneficiaries are limited to receiving a maximum payout of CA$500 annually. Moreover, low-income families are also eligible for extra grants.

Investments in an RESP are tax-free. However, if you withdraw funds for non-educational purposes, it would be subject to a tax along with a 20% penalty.

Life insurance policyRegistered Education Savings Plan (RESP)

You can purchase a life insurance policy for your child that will cover them against any unforeseen circumstances. In addition, compound interest accrues your investment, allowing it to grow tax-free due to the insurance contract.

To get the maximum of your child’s life insurance coverage, acquire a reputed company’s whole life (cash value) policy. The death benefit (DB) and the cash surrender value (CSV) are the two parts of an entire life insurance policy.

Insurance companies pay out death benefits tax-free only when the insured dies. Individuals who have a cash value insurance policy have the option of borrowing against the policy’s CSV or just terminating their insurance contract to receive the CSV amount. You can buy whole life insurance and use the extra CSV to protect a child’s finances.

You can withdraw the funds at any point during your child’s life. Later on, your child will have the option of withdrawing the funds or investing them in their retirement savings.

Real estate

If you can afford to buy a house in your child’s name, it’s an excellent way to save money for future needs, including medical emergencies. Investing in real estate can be profitable if done correctly. This means that it is necessary to conduct thorough market research before purchasing.

Even if the child decides to sell the property, the money will be better spent elsewhere. As a result of this arrangement, you are no longer concerned about your child’s educational needs, startup endeavors, and other responsibilities.


Your child deserves the best start. You can help them get on the way to financial and personal success with your assistance. Consider the things you may take to ensure their financial future is brighter. If you have idle funds but are confused about the correct form of investment, do not hesitate to talk to your finance expert. They will surely help you make the right decision.

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