How to help your kid pay for college
A child’s college education has recently become one of the largest expenses for the typical family. However, fear not; there are many options by which you, the doting parent, can help your child save for college and learn a bit of financial responsibility on the side.
Utilize the government
Take advantage of the Canadian Education Savings Grant as soon as you can get yourself into a bank. The way to do this is to open a Registered Education Savings Plan, or RESP, which you can do from the day of your child’s birth. Make sure that the Registered Education Savings Plan that you choose does not have a lot of extra fees attached to it, as it is an investment account. Read the fine print.
A RESP is a tax deductible deposit and a percentage is matched by the government up to a certain level – $7,200 at the current level. There are also other ways of getting completely free money from the government, such as with a Canada Learning Bond.
Open savings accounts that are college-specific
If you calculate that you are going to max out your RESP and you will still have bills to pay, then open up a savings account that is solely for your child’s college education. Because you are investing so early, you can take advantage of some of the long term investments which pay higher interest rates, like certificates of deposit accounts, money market accounts, or even annuities.
Give them the responsibility of helping to pay for their education early.
It’s important that a child learns to help save for college, and there are many ways to do so. For example, everybody loves giving money to young people — on their birthdays, at Christmas, etc. — and your child can help by saving some or all of it. If your child learns the value of putting this money into a savings account or other type of investment account instead of spending it, they will have more when they finally get to touch it, and they’ll have a sizable chunk saved up to help offset those college costs.
You can also show your kids what it means to have an income by giving them an allowance and requiring them to put aside part of it for their future college education. If you choose, you can create a system where they can pull out some of the money if they get a scholarship. This will give them a long-term goal to work towards and encourage them to apply for scholarships.
Encourage them to start a business early
Do not relegate your kids to the dregs of employment just because they are young. Teach them to be entrepreneurial and think outside of the box while young. Encourage them to read business books and start businesses while they are young to save for college. If they whine about not making enough, help them figure out how to make more; just don’t give it to them.
When it comes to the college education, the main point to get across is shared responsibility. The rising costs of college demand that families come together on the issue for the good of the kids, but it is also a great opportunity to start raising a fiscally responsible child early.