ClearView Financial Solutions Inc.

What to Financially Expect When You’re Expecting

Expecting a new family member? Exciting, but equally as scary when you consider all the uncertainties that come with parenting.

First day of school, learning to drive, parties and dating… over the years, there will be plenty to worry about as your child grows and ventures into an independent life. Your finances should not be one of those worries. To keep those financial worries at bay, let’s review the key aspects to consider when laying out a solid financial foundation for the newest members of your growing family.

Saving For Those Important Milestones

Your child’s life will be full of exciting new milestones; attending university or college and buying their first home, are perhaps amongst the most significant, not to mention costly. As a new parent, what should you consider today and how can you best prepare for tomorrow?

Post Secondary Education: At first glance, the most common concern is saving for your child’s post secondary education; rising costs of tuition and housing have made it necessary to save now, well before that those milestones arrive. The government sponsored Registered Education Savings Plan (RESP) account is an obvious and strong choice for the following reasons:

  • Availability of federal government grants - the government will match 20% of your contributions up to $500 per year, to a lifetime limit of $7,200. Free money!*

  • Tax-free growth of the investments within an RESP - you can contribute up to a lifetime maximum of $50,000 per child and although the income is taxable in the student’s hand when withdrawn, as a student, they are typically in a much lower tax bracket.

Watch our SMART TALK… about registered education savings plans (RESPs) video, read Getting the Most from Your RESP and try the RESP calculator to discover winning strategies on how you can maximize your child’s RESP. The sooner you invest, the faster it grows!

First Time Home: With inflation and the affordability of home ownership being top of mind, many parents are wondering how they can help their child create savings for when this pricey milestone approaches. Some considerations that you can take into account:

  • In-trust-For savings accounts (ITF) - Once an ITF is opened, as trustee, you can make contributions or investments into the account on your child’s behalf, but you must use any withdrawals for their benefit. Then, once they reach the legal age of majority in the province in which they live, they are entitled to the account’s proceeds.

  • Downsizing – when your child leaves the nest, you may be able to downsize the family nest and gift some proceeds to your child to help them get a head start in purchasing their own home.

Life insurance products – There are a number of future financial advantages and guarantees to explore when you purchase permanent life insurance for your child. And, until you decide if and when to pass along the asset to your child, you have full ownership over the policy and its cash values.

Insurance As A Financial Tool

Can insurance help your child secure their financial future? It sure can! In fact, you can use insurance products to help secure a child's future insurability, as well as leverage the unique attributes of insurance to create a tax-advantaged asset that can be accessed in the future.

Below are a few key considerations regarding juvenile life insurance and how it can offer financial solutions for your child.

  • Securing insurability - many juvenile insurance policies will allow benefits to grow over time. Securing the insurance contract will guarantee that the policy will payout at a later time, regardless of the child’s health in the future, including what they may face as adults.

  • Unique asset - these policies can generate significant values which can be accessed at various times by the policy owner and exempt life insurance policies, that children can qualify for, will grow without the consequences of annual taxation!

  • Fixed cost - these plans are often set with a fixed number of payments which either parents or grandparents can fund.

Likewise, critical illness (CI) insurance coverage provides unique protection and asset qualities.

  • Comprehensive coverage - critical illness insurance pays while you are alive. Also known as living benefits, these policies typically cover a large number of illnesses and conditions (including the major three: cancer, heart attack and stroke). Child CI policies not only cover the 25 conditions in full, but also a number of child-related illnesses.

  • Unique asset - many child CI policies have unique return of premium options, which will allow the policy owner to receive a lump sum return of premiums paid if the benefit has not been used, allowing the policy and its coverage to continue!

Looking for more information on the financial benefits of insurance? Read Choosing Insurance that Grows with You, Do Younger Canadians Need Insurance? and use the Exploring Your Life Insurance Options tool, because knowledge is power.

References

* Some provinces offer additional incentives or grants.  Please contact us to learn more.