The Canadian Foundation for Economic Education

andThe Building Futures Network

present

“Tips on Saving for Your Child’s Future Education”

Topics

1. Savings Strategies

3. Making It Easier to Save

5. Start Saving Early

4. Other Ways to Save

2. Establishing a Budget

6. Ways to Make Money Grow

1. Savings StrategiesThere are a number of ways to help make your money go further. They include:

- saving on costs related to banks, credit cards, and mortgages

- spending less at home

- saving on transportation

Let’s look briefly at each.

Saving at the Bank

- keep enough money in a chequing account to cover expenses, and keep the rest in savings

- look for a bank with no-fee chequing

- choose a bank that has many ATMs

- if the bank has withdrawal charges, plan your purchases and withdraw larger amounts of money at once

Cont’d

- consider an Internet bank – lower costs

- don’t bounce cheques - $20 or more fee

- look for an account that uses your average daily balance for calculating interest

Saving on Credit Cards

- choose credit cards that have the lowest rates and no annual fees

- pay off the balance each month to avoid interest charges

- use the card wisely – not just to get points

- pay off balances on highest interest cards first

Saving on Mortgages

- always shop around for the best rate

- consider refinancing your mortgage if interest rates drop

- pay off your mortgage faster if you can

- pay down principal any time you can

- pay your mortgage biweekly rather than monthly

Spending Less at Home

A. Save on heat and cooling:• lower hot water temperature to 50oC• insulate or replace old windows• keep furnace in good working order• don’t heat or cool rooms you seldom use• in winter, open blinds and curtains on the

sunny side of house and close them at night• install a programmable thermostat• have an energy audit done and decide

actions Cont’d

Spending Less at Home

B. Saving on hydro:

• wash clothes in cold water• cook with a microwave – not an oven• buy energy efficient light bulbs• don’t leave lights on all day – use timers• turn off lights when you leave a room• turn off computers and electronics at night

Saving on Transportation

– buy the right car for you

– walk short distances and use public transit

– shop for the best insurance rates and only buy the insurance that best applies to you

– keep your car in good running order and follow cost saving measures such as avoiding idling and fast acceleration

Information Needed to Build a Financial Plan

- What you own- What you owe

- What you make

- What you spend

- What you hope to achieve

2. Establishing a Budget

• Gather the info you need – pay stubs, monthly bills etc.

• Use a budget worksheet – available on Internet

• Keep the budget simple and clear

• Once made, keep it up to date and accurate

• Be honest and realistic – don’t fool yourself

Cont’d

2. Establishing a Budget

• Allow for surprises

• Be prepared to alter it based on experiences

• Reward yourself if your budget works out

• If you don’t overuse it, use a credit card as monthly statements help you track. Always pay in full at the end of the month

Source: Investor Education Fund – www.investored.ca

3. Making It Easier to Save

• Join a savings plan at work Some plans will also contribute to savings

• Set up a deposit to your savings account Here you set up your own savings program

• Save your tax refund You could put this money into an RESP

Source: Investor Education Fund – www.investored.ca

4. Other Ways to Save

Shop Less – Save More:

- know your budget and stick to it

- look for sales and discounts but only buy what you will use

- buy used or second-hand when appropriate, when buying a car for example

cont’d

4. Other Ways to Save

- compare prices on the Internet rather than driving from store to store

- plan your spending – don’t buy on impulse

- try things out before you buy them

4. Other Ways to Save

Saving on Food:

- never shop on an empty stomach

- make a list and shop the list

- don’t shop by committee – too much is bought

- check papers and flyers for sales and coupons

Cont’d

4. Other Ways to Save

- plan meals based on what’s on sale

- buy extra when something you know you will use is on sale

- consider buying store brands, which are cheaper- shop where prices are lower – be loyal to price not to store

4. Other Ways to Save

Saving on Clothes:

- buy in the “off” season

- when buying new clothes, match with clothes you own for versatility

- avoid fads – buy classic

- don’t spend a lot on kid’s clothes they’ll outgrow

5. Start Saving Early

The cost of post-secondary education is expensive and continues to escalate. Starting to save early is critical to meet those demands. One way to start saving is by opening a

Registered Education Savings Plan (RESP)

- a special savings account that can help you, your family, or your friends save early for your child’s education after high school.

- savings for education grows tax free until the child enrols in education after high school.

cont’d

Registered Education Savings Plan

1. Get a Social Insurance Number (SIN) for yourself and the person in the RESP

2. Apply to the Canada Revenue Agency for The Canada Child Tax Benefit if your family net income is $74,357 or less

3. Decide on provider and type of RESP

4. Put some money in the RESP

Steps To Setting Up an RESP

Types of Plans:

• Family Plan – for a child(ren) related to you

• Individual Plan – beneficiary not necessarily related

• Group Plan – administered by a group leader and requires regular payments

6. Ways to Make your Money Grow

1. Investments that pay INTEREST

2. Investments that pay DIVIDENDS.

3. Investments that pay CAPITAL GAINS

Investments that pay interest:

- include such things as GICs and bank accounts

- the money is safe but grows more slowly

- the money is accessible and the growth known

- no guesswork or risk

Investments that pay dividends:

- include such things as some stocks

- regular income depending on how the stock did

- if outside an RRSP, there are taxes but at a lower rate than the tax on interest and at a higher rate than the tax on capital gains

Investments that pay capital gains:

- these include stocks, bonds, mutual funds

- make sense for long-term investment

- money tends to grow faster but there are no guarantees – money could be lost

Presented by

The Canadian Foundation for Economic Education

andThe Building Futures Network