Being a parent is the challenge of a lifetime. Discover tools that will help you secure the future of your children!
By Dominique J. Favreau
personal finance blogger
DBecoming a parent brings many moments of happiness, but also entails many responsibilities. In addition to ensuring your parental role and day-to-day obligations, you must think about guaranteeing the financial security of your children in the long term. Fortunately, several financial tools exist to give you the means to achieve this and offer the best possible future to your children.
The RESP, this essential
The Registered Education Savings Plan (RESP) is the perfect way to put money aside to pay for your children’s post-secondary education. Indeed, RESP contributions allow all parents to benefit from 30% subsidies, this figure can even reach 45%. In addition, low-income families benefit from $500 in education bonds simply by opening an RESP, before even having put a penny into it!
Your contributions and grants grow tax-free, like an RRSP. Upon withdrawal, your child will have to pay tax on government grants, interest, dividends and capital gains.
You can contribute up to $2,500 per year for each child to take advantage of the grants, for a total amount of $50,000 each. It is also possible to make up the years during which you have not contributed, it is never too late to start!
If you have several children, you can divide the earnings from the family RESP among them and help them according to their specific needs.
They will then have had plenty of time to use it and the possibility of changing lanes on the way! If ever there were unused money left in the RESP, it would also be possible to transfer it to your RRSP.
Life insurance for a comfortable future
Life insurance is used to leave money for your loved ones after your death so that they are not caught off guard. In this sense, it is ideal for parents who want to ensure that their children will have the necessary means to move forward in life, even if they are no longer there to meet their needs.
The benefit paid may be for the benefit of the person you designate. In addition, the amount of protection granted to beneficiaries is tax-free and generally paid quickly, within days of your death. The amount paid depends on the premiums you have chosen and can vary greatly depending on your means and the needs you want to cover. It’s usually $10 to $100 per month depending on your age, whether you’re married or single, smoker or not, and how much you want to insure.
The protection must at least cover the costs inherent in your death, such as the funeral service. Then, it can replace for several years the income that you would have brought home if you had been there and had worked. This allows your children and family to maintain their lifestyle and cover day-to-day expenses.
It is possible to improve your life insurance to allow the repayment of debts or future expenses, such as education costs. Life insurance can also provide your children with the cash necessary to preserve the important assets of your family heritage rather than having to sell them for lack of means, such as a chalet for example.
Note that some loans are already covered by life insurance. You can therefore exclude them from the calculation of the amount of coverage desired.
Disability insurance, because life goes on
Over the course of life, illness or injury may render you unable to work or carry out your usual activities. Disability insurance can then allow you to compensate for your loss of wages while continuing to cover the needs of the family while you get back on your feet.
Disability insurance contracts vary greatly. Make sure that the duration and amount of your salary coverage matches your needs. For example, owning individual disability insurance can cost approximately $30 to $60 per month.
Even with such insurance, it’s a good idea to have an emergency fund in your budget, because there’s always a waiting period between when you can no longer work and when benefits begin to be paid to you. If you don’t have access to disability insurance through your employer or professional association, you can purchase individual insurance. However, where a portion is paid for by a third party under group insurance, you normally have to pay tax on the claims.
You can opt for specific short-term and long-term insurance according to your needs and means. Short-term insurance is spread over a few weeks and provides you with an amount that generally represents less than 70% of your usual income. When it expires, long-term insurance takes over. Its period of validity and the amount of its services are specific to each contract. For example, 2 years at 50% of salary.
A will in your image for the future of your family
When you become a parent, good estate planning is essential if you want to ensure that your children will benefit the most from what you have built for them. In Quebec, no one is obliged to make a will. However, if you don’t have one, the law determines who receives your assets, which may not be in harmony with your values and intentions. By making a will, you choose your heirs and the guardians of your children. This greatly facilitates decision-making for your family after your death.
A will is especially important for common-law spouses because they inherit nothing in the absence of a will, even after decades of living together. Hence the importance of making one! A standard notarized will costs around $400 per person, or more depending on the situation. You can also write your own will by hand, called a “holographic” will. You might think it’s free since you’re the one writing it, but be aware that after your deat