What are the best options for saving funds for the education of a child in Canada apart from RESP, which provides good returns?
Apart from an RESP, you can consider investing for your child’s education in a Tax-Free Savings Account (TFSA), a formal trust, an in-trust account, and a life insurance policy.
An RESP is still the best investment option for your child’s education, especially if you open an account in a reputable company like Knowledge First Financial. If you visit this website, you’ll find more information about the company.
Now, I’ll discuss the other four savings options for your child’s education in Canada.
Tax-Free Savings Account (TFSA)
The TFSA is a government-registered plan that allows Canadian’s savings to grow tax-free. It’s a highly flexible savings account that allows plan holders to withdraw funds at any time. Besides, you can save money for a vast range of functions.
Most people use TFSA to save for short-term goals, such as weddings, vacations, trips, and birthday parties. You can also use it to save for your child’s education. However, it requires self-discipline because you may get tempted to withdraw the savings.
Formal Trust
If you have assets like a real estate, you can use it to secure your kid’s future education through a formal trust. It’s a legal document that specifies how the trustee will manage or use your assets. Notably, money can also be an asset in a formal trust.
You can use a formal trust to designate the purpose of your savings/money. So, you can rest assured that the funds will only be used to fund your child’s education.
In-Trust Account
I would suggest that you also try out the in-trust account. It works more similarly like formal trust, but simpler because it requires minimal paperwork. You can open an in-trust account in any bank and start saving for your child’s education. However, when the child is no longer a minor, he/she will gain control over the account.
Life Insurance Policy
While most people use life insurance to cover their loved ones, you can also use it to fund your child’s education by tapping into the policy’s cash value. The cash value is tax-deferred.