“When you’re a new parent, you’re concerned about doing the right thing. You’ve got this infant with so much potential, and hearing that you may not be able to afford his or her education makes it very hard,” says Mike Maloney, a Saint John, N.B.-based father who started saving for his son's education when little Simon was only a few months old.
But how do you find the money to save for something that seems so far away when more pressing items like kitchen renovations, family trips and your own retirement savings compete for attention?
Sarah Deveau, mother of three and author of Money Smart Mom: Financially Fit Parenting and Sink or Swim: Get Your Degree Without Drowning in Debt, provides the following smart ideas for putting money aside for your child’s education:
1. Set up an RESP
An RESP (registered education savings plan) is the easiest way to save and grow your child’s education fund, says Deveau. “What many parents don’t understand is that when you create an RESP it can be flexible,” she says. “If you can’t commit to investing $20 or $50 every month, wait until you get a cash gift from Grandma, or a raise or bonus at work and make a lump-sum payment.”
- Estimate how much you need to save with this RESP calculator.
2. Make your RESP contributions automatic
If you can commit to regular contributions, ask your financial institution to set them up to automatically go from your savings account into your RESP. “Some parents contribute their monthly Canada Child Benefit into RESPs,” says Deveau, “which is often direct-deposited into their bank accounts anyway.”
This is how John Elliot, a father of two in Kitchener, Ont., contributes to his kids’ RESPs. “We set it up so that our contribution comes out a day or two after we receive the benefit so we really don’t have to think about it.”
3. Sell your kids’ old toys and clothes
If you tend to throw away or donate old toys and outgrown clothes, take a closer look at them and see if there are any you might be able to sell at a consignment store or yard sale. It not only cleans up the toy room, but may provide you with some extra cash to invest.
4. Find creative ways to reduce expenses
Between the play centres, the video games, the gymnastics classes, and the elaborate birthday parties, there are always places to trim, says Deveau. “Think about the $200 you might spend on your child’s birthday. Consider cutting your child’s birthday party back to $100, and investing the other $100 into an RESP. You’ll immediately have $120 in the account, and you’re still having a party.”
Save even more by making your own cake instead of ordering one from the bakery. Or have an old-fashioned party at home instead of renting out a play facility.
5. Involve your family
Deveau recommends asking relatives to consider giving “experience gifts,” such as paying for soccer camp or swimming lessons, rather than toys. “They’re more memorable than toys that get lost or broken, and you can put what you would have spent on these lessons or activities into an RESP to save for their future education,” Deveau says. What’s more, special occasions like birthdays, graduations and holidays are excellent opportunities to encourage grandparents, relatives and friends to contribute to your kids’ RESPs.
- Turn your financial dreams into action with our Bright Start tool.
Free Starting a Family Email Series
Whether you’re having your first child or expanding your family, you’re about to begin an unforgettable journey. We’re excited to help you along the way with this free, four-day Starting a Family series. Sign up today to find out how you can get your finances ready for a baby.