Hi Money Monkeys!
Hope you are all having an awesome weekend. It was really beautiful in Toronto. I think I got a tan from walking around it the sun. I super pasty after this long winter.
I get many questions from people, asking what they should do with their kids money. Should we open an RESP for the kids? What do you need to open one? How much should I save for them? How can I teach them about money early?
So I’ve decided to answer all of the questions above. Thanks for everyone who asked me the above. Here we go!
1. Should I open an RESP ( Registered Education Savings Plan) for the kids?
Holy crap, YES – the sooner you open it, the longer the investments will have to grow for your kids. Plus there is a contribution bonus that is like free money. Here are the big benefits:
a) Interest income and investment growth earned within an RESP are not taxed as long as the funds remain in the plan.
b) The Canada Education Savings Grant (CESG) matches 20% on the first $2,500 contributed annually to a maximum of $500 a year ($7,200 overall free money!) for a child under the age of 18, plus possible catch-up grants.
c) Incentives are also available for qualifying families through the Alberta Centennial Education Savings (ACES) Plan and the Quebec Education Saving Incentive (QESI). I outline these in my book. Some children are also eligible for a $500 Canada Learning Bond (CLB) with an additional $100 a year up until the age of 15.
2. What do you need to open an RESP?
You just need a SIN for your child when you go to the bank. Visit a Service Canada office and provide an official document that proves your child’s identity and status in Canada. For a Canadian citizen, you must provide a Birth Certificate or your Certificate of Canadian citizenship documents.
3. How much should I save for each child?
The average cost for a post secondary eduction ( living away) is $80,000. Here is a calculator to figure out how much you will need for your kids depending on them living at home or away. There are different costs for each province, college or university, what courses they take etc. This calculator will give you a good ballpark. You might want to sit down :/
4. How can I teach them about money early?
There are a few money books out there for kids. There is a Little Critter book that I love called Just Saving My Money. And of course Trouble With Money from the Berenstain Bears. It’s super cute.
There are also awesome sites for kids like this Kid Zone Site . It’s Canadian which is nice too.
I’d also get them interested in stocks and the stock market. Talk to your advisor about buying a few shares of Disney, Apple, Ford, McDonald’s, Coca Cola or a company that they can understand. You can also call these companies and ask for a few shares to buy directly from them. You don’t need an advisor if you don’t have one.
You can walk them through how to follow the stock price and news on Google Finance. They’ll be off to Bay Street before they can walk! Let’s all raise our kids to be money mavens/mavericks.
Have an awesome week,
Dave
