One of the greatest gifts you can give your children is to help them create a good financial foundation. One way to do this is to start saving up and investing for them.
The cost of raising children can be substantial, clothing, feeding, child care, and other costs may seem little, but they add up eventually. One of the biggest costs you will incur for your children is post-secondary school expenses. You can give your children a great start if you save up for their education.
That being said, what are some of the best savings accounts for children in Canada?
Registered Education Savings Plan (RESP)
One of the most important investments or savings plans for your child/children in Canada is the RESP or the Registered Education Savings Plan.
The RESP is a registered savings plan targeted towards saving for children’s education beyond high school.
University and college expenses are a huge reason people get into debt, putting up a plan for your children towards this cause saves them this financial burden and puts them a step forward in their personal financial journey.
Key things to note about the RESP
A parent, guardian, grandparent, relative, or family friend can open an RESP for a child. You do not need to have a bank account to open an RESP.
While there is no limit to how many RESP accounts you can open for a child, the lifetime contribution limit is capped to $50,000 per beneficiary on all RESPs combined.
Opening an RESP is free with financial institutions in Canada but you would need to provide a social insurance number (SIN) and other required documents like a birth certificate.
Benefits of an RESP
A benefit of saving for your child’s education through an RESP is that you get eligible for the government Canada Education Savings Grant (CESG). The CESG is targeted towards paying for children’s education through universities, colleges, apprenticeship programs, and trade schools.
The CESG is an incentive to encourage saving for children’s education. The government contribution has a lifetime limit of $7,200 per child.
The CESG contributes a maximum of 20% of your RESP contributions up to $2,500. To take advantage of this top-up from the government, it is advisable to contribute at least this minimum amount of $2,500 towards your child’s RESP annually.
For example, if you contribute $3,500 to your child’s RESP in a year, the government would provide a maximum of $500 which is 20% of $2,500 into that RESP account. If you contribute $2,000, the government would provide only $400, which is 20% of $2,000 into that RESP account.
However, middle and low-income families might be able to receive additional amounts of CESG, depending on income level, families can receive 10% or 20% on the first $500 contributed to an individual child’s RESP annually. See more information on the Canadian government website here.
Other government contributions towards the RESP include the Canada Learning Bond (CLB), a provision to a maximum of $2,000 for eligible low-income families, and provincial education savings incentives from the British Columbia and Saskatchewan government.
Savings account
Different financial institutions in Canada offer special accounts targeted towards children and youths. If you need to choose a savings account for children, consider the following factors:
- Proximity and accessibility
- Fees and charges
- Transaction limitations
- Interest gained
Some notable children and youth savings account options include:
TD Youth Account
The TD Youth Account is structured to provide benefits of both a chequing account and a savings account. You can open this account for a child who is 18 and younger to encourage yourself and them to save.
Benefits of this account include:
- Unlimited transactions: You can transfer money into and out of this account as frequently as you need to.
- Interest earned on every dollar: No matter how much you save in this account, interest is earned on your balance.
- No fee: There are no monthly fees or transaction fees attached to this account. You also do not need a minimum balance to qualify for no fee transactions.
- Automated savings: Parents or guardians can set up automatic transfers to the TD Youth Account form their own accounts through the TD Pre-Authorized Transfer or Simply Save Program .
Cons of this account include:
- Non-TD ATM and Foreign ATM fees between 2% to 5%.
- Interac e-transfers fees of $0.5 for up to $100 and $1 for over $100.
Read more about the TD Youth account here. You can also consider using the TD Student Chequing Account or TD Hgh Interest Savings Account.
RBC Leo’s Young Savers Account
This savings account is suitable for children between 0-12 years of age.
Benefits of this account include:
- No minimum balance required for this account.
- Parents and guardians can set up automatic money transfers from their accounts for free
- You have access to free unlimited Interac e-transfers
- RBC is offering free $25 when you open an RBC Leo Young Savers Account (Terms and conditions apply).
Cons of this account include:
- This account is restricted to only 15 free debit transactions after which you pay $1.25 per debit transaction.
- Non-RBC ATM and Foreign ATM fees between 2% to 5%.
See more about the RBC Leo’s Young Savers Account here. Also compare similar children’s savings accounts, the RBC Student Banking and RBC No Limit Banking for Students.
CIBC Advantage for Youth
This account boasts of the offerings of a savings account with the benefits of an unlimited chequing account. It caters to Canadian residents of age 18 0r younger.
Benefits of this account include:
- No minimum balance required for this account.
- CIBC offers $25 when you open your child’s first CIBC Advantage for Youth account (Terms and conditions apply).
- Unlimited transactions with no monthly fee.
- Offers competitive interest rate calculated daily and paid out monthly.
- Free Interac e-transfers
Cons of this account include:
- Non-CIBC bank machines and Foreign ATM fees between 2% to 5%, plus a 2.5% administration fee where applicable.
The CIBC Advantage for Youth account is not suitable for children after they turn 19, when this occurs, the account automatically converts to the CIBC Premium Growth Account.
Scotia Bank Primary Savings Junior Account
This savings account is tailored for children between 0-17 years. The account has to be opened with a parent or guardian.
Benefits of this account include:
- No monthly fees.
- Unlimited deposits and transfers between your account at Scotiabank ATMs
- Interest calculated on the minimum monthly balance and paid monthly
- No minimum opening balance
Cons of this account include:
- Non-CIBC bank machines and Foreign ATM fees between 1.5% to 5%. More details here.
Alternatively, consider the Scotiabank Getting There Savings Program for Youth Account. This is for children who are 18 years and younger. It offers:
- Unlimited debit transactions
- 2 free Interac e-Transfer transactions per month
- No monthly account fee
If you currently bank with any financial institution, you can find out what savings and investment options they offer for children.
Other forms of investment
You may decide to open general savings accounts for children early on, invest in an education fund through the RESP or consider stock investments. Canadian couch potato discusses whether to invest in stocks for your kids.
You can buy individual stocks for your children or invest in mutual or index funds on their behalf.
