It is a parent’s responsibility and obligation to provide financial stability to their child throughout their upbringing and ensure they can become financially independent. However, a parent must know when it is time to stop the bankroll. Here are four tips to help set them up financially:
Setting Up a TFSA Account
One of the best things a parent can do for their child is to set up a TFSA account. Parents can encourage their children to fund the TFSA by making a matching contribution. So, if a child contributes $100 to the fund, the parents will also contribute $100. This process can quickly generate growth within the account once diligently supplemented.
Don’t Purchase “Extras”
Of course, the generosity of parents should stop at world cruises, luxury cars and the most recent tech gadgets – these are things the children should be purchasing themselves. They need to understand debt just as much as they do wealth.
Teach Them about Credit Cards
Parents should teach their children about credit cards. Instead of dealing with the compounding interest on an outstanding balance, they need to impress upon them the importance of paying the card off before the balance is due, so as to not rack up unnecessary interest charges.
Educate them on RESP’s
One of the first steps parents should take when having a child is to set up a Registered Education Savings Plan. This can be an effective way of alleviating the financial burden of sending a child through their education and a great way of protecting the parents’ retirement nest egg. Ensuring the RESP is consistently supplemented by the parents and the child will overtime allow the child attend a higher education. Teaching a child the importance of contributing to the RESP and why they’re doing it will hopefully lead to a greater sum of money when it is needed.
