How to start a College Savings Account For Your Child

If you are starting a family or you already have children, then the thought of college savings may have come up. Although young children are a while away from deciding what education path they want to strive towards, it takes years to save for an education. So, if you are thinking of starting a college savings account, consider some basic tips on when and how to save.

Beginning the Saving Process

‘How will I save for my child’s education’? This is a question that almost every parent will ask themselves when planning for their child’s education. Unfortunately, it can become easy to overthink all the steps involved in the saving process. Start with simple things to avoid becoming stressed with the beginning planning stage. This will include brainstorming what type of account you want to set up their savings in, what bank you will use, and analyzing possible payment schedules.

When Should I Start Saving?

There is no right or wrong answer when starting your savings for your child. If you already have a child, it is never too late to start saving. Yet if you are expecting soon, you can have the advantage of having a few extra years to save. Is it essential to know that the sooner you start saving, the more money your child will have for their education. This will offer them much more freedom of education options and study paths they want to pursue. Most Canadians do not start saving until their children are around seven years old. If you can start saving when your child is born or even a few years younger, you will have the opportunity to save a couple more thousand dollars, which will make a huge difference.

What Type of Account Should I Set Up?

There are many options when it comes to bank accounts for savings. Yet many Canadians have found benefits in using an RRSP account for their child’s savings. An RRSP can be used for their college savings, yet it can also be put towards their future and retirement. There are some financial benefits of using an RRSP, such as deferring taxes on money put into the account. Yet there are also other specific savings account options, such as RESPs. This type of account has its advantages, as you can grow your money tax-free and have flexibility on when you add money to the account. Of course, both of these savings accounts will have their advantages and disadvantages. That is why it is up to you to choose which account you believe will best suit you financially.

How Much Will Their University or College Cost?

This is most likely one of the main questions you ask yourself right now. There is also another thing that you are unsure of; what course your child will want to take. Your child may be interested in going to university, taking a college course, or traveling to another country for a specific study. All these types of education have different costs, yet it is crucial to be prepared since they may be interested in taking anything. You also need to consider other costs not included in tuition, such as room and board, transportation, books, and additional campus fees. A college course can range anywhere from $20,000 to over $25,000, and four years at university can cost up to $80,000.

How Much Should I Save?

Unfortunately, there is no set correct answer to this question. This savings amount will all depend on how much you make from your income and what you can afford from your financial situation. You may be stunned after examining how much university and college can cost. Of course, these numbers can make you feel troubled at first, yet this is to be expected before implementing a plan. You need to first start by choosing what type of account you will use to save. Once this is determined, you can look over payment options with your bank advisor. They will examine you and your spouse’s income and determine your max savings amount per year. Of course, you may not want to go to your max since this can make other aspects of your life tight financially. Overall, it would be most beneficial if you and your spouse can sit down and discuss what is a reasonable amount you can financially afford to save. Once you determine this critical factor, you can set up your payment schedule.

Saving for your child’s education will be one of the most expensive things you do for them. Yet the money you save for your children will be the most valuable thing to them and their future. If you have any questions about saving or setting up a savings account for your child, please reach out to us!

Sources

-Cazzin, Julie (2018). How to Start Saving For a University Education at (almost) Any Age. Macleans. Retrieved from https://www.macleans.ca/education/pay-for-university-education-tuition/

-Early Bird (2021). Your Complete Guide to Starting a College Fund For Baby. Retrieved from

https://www.getearlybird.io/blog/starting-a-college-fund-for-baby

-Salazar, Antoinette (2021). How Can I Save For My Child’s Education in Canada. About Canada. Retrieved from https://cubetoronto.com/canada/how-can-i-save-for-my-childs-education-in-canada/