When I was about a year old, my parents invested some money in an education savings fund for me. It was a small sum, and they never added any more to it. When I started university, the fund returned to me the original amount that my parents had invested and then, every year for the next three years, I received the same amount again—the interest the original investment had earned.
Saving for your child’s education can be as easy as that. There are many funds and options available to parents today to make it easier to set money aside for your child to attend university. Here are a few things to consider when investing.
What Does the Investment Offer?
Ask what happens with the money in the plan or fund if your child does not attend university, attends only part-time, or goes to a trade school. My twin brother received the principal amount back from his education savings fund, but never received any of the interest on that amount because he chose to attend trade school.
When my husband and I looked into investing for our daughters, we chose a family fund, where both girls’ names are on the investment. If our oldest girl chooses not to attend university, her younger sister can use the money, or vice versa. If we have more children, we can add their names to the fund.
You will also want to ask if there are fees associated with the plan, if you are expected to make regular payments, if a minimum investment amount is required, and what investment options are offered.
Invest Regularly
Starting a family often happens around the same time that parents are starting careers or buying houses—when money is tight. It can be hard to find extra dollars for something that isn’t going to happen for another decade or two. Even small investments can make a difference when given that long to earn interest. If your children receive money from relatives for birthdays or Christmas, consider putting that money into their education savings fund.
My husband and I use the Canada Child Tax Credit for our daughters’ education savings fund; the money gets transferred directly from our bank to their investment on a monthly basis. In Canada, the government matches parents’ investments up to a certain amount (though this grant money is returned to the government if the child does not attend university), making it worthwhile to at least contribute that base amount.
Shop Around for Educational Investment Providers
There are quite a few options available to parents today, so take the time to shop around and compare plans. Most local banks offer investment advice and options. Check out Canlearn.ca for information on Registered Education Savings Plans (RESPs) in Canada (including a list of RESP providers). You can also check with local investment brokers about options for education savings.