Planning for your child’s future is a significant responsibility. In Canada, there are several investment strategies that can help you secure your child’s financial future. Here are three key options:
A savings account for children is a way to introduce your child to the concept of money management at a young age. These accounts, although earning a low interest rate, are specifically designed for children and remain active until they reach the age of 18 or the age of majority in their province.
Benefits:
• These accounts typically do not charge a monthly fee and allow a reasonable number of monthly transactions at no cost.
• The savings account earns interest, allowing your child to see their balance increase over time.
• It provides a practical lesson on investment returns and the power of compound interest.
A Registered Education Savings Plan (RESP) is a contract started by an individual (the subscriber) for one or more beneficiaries (the future students) and agrees to make contributions for them.
Benefits:
• Contributions grow tax-free within the RESP.
• Access to the Canada Education Savings Grant (CESG) which matches 20% of your contributions up to a maximum of $500 per year and $7,200 lifetime per child.
• The RESP can be used for any university or vocational program around the world, not only those on the RESP Designated Educational Institution list.
Whole life insurance for children is a policy that provides coverage for your child’s entire life. It also includes an investment component that earns dividends annually and grows over time.
Benefits:
• The policy provides a death benefit as well as cash value growth that can be used for future needs like education or a down payment on a home.
• The cash value grows tax-free, providing potential tax savings.
• The cash value in the policy can also be used as a personal retirement fund and can be accessed tax-free.
Infinite banking is a distinctive financial strategy that uses a whole life insurance policy as a savings vehicle. With infinite banking, an individual can establish a tax-free source of self-funded capital that can be utilized for various investments or even expenses.
The amount of cash value growth can:
The essence of the infinite banking concept is a participating whole life insurance policy that when it is overfunded, exponentially increases the cash value. Once such a policy is established, it is possible to lend yourself money using the cash value of the whole life insurance policy as collateral. A collateral loan allows the policyholder to access the cash value BEFORE death and still keep the cash value in the policy to continue growing.
