The Best Gift to Give Your High School Graduate is Financial Freedom: As the class of 2019 prepares to put on their caps and gowns, this time of year many parents are wondering what to give their child as a graduation gift. Instead of giving your graduate one of the more traditional gifts such as a laptop, jewelry, watch or personalized luggage, consider giving them a gift that will keep on giving – a financial plan.
The Best Gift to Give Your High School Graduate is Financial Freedom
In today’s economic climate, where tuition is continually on the rise, parents are concerned about their children’s financial future and how to teach them to manage money properly. Planning for the cost of a higher education and learning how to plan and stick to a budget are becoming increasingly important for high school graduates.
A good way to start is by providing your child with sound financial advice early on. This begins with deciding who will foot the cost of tuition as well as other university related costs. Some parents may require their children to help pay for some of these expenses. Other parents may be willing to pay for everything, but in return expect the child to maintain good grades cost of a higher education.
It really comes down to what works best financially for your family. There’s no one perfect approach, but there should be a sound plan put into place ahead of time.
Parents should sit down with their children and help them create a budget. Many graduates heading off to university will be managing their own money for the first time ever, and will need a lot of guidance. Help them estimate things like living expenses, cost of books, school supplies and meal plans.
One recommendation for parents in Canada is to consider opening a Registered Educational Savings Plan (RESP) to help them save for their children’s post-secondary education.
Setting money aside in an RESP through providers like Children’s Education Funds Inc. (CEFI) can be a financially smart way to ensure your child graduates with the financial freedom that doesn’t typically come with paying off student loans.
In addition to tax-deferred growth, the federal government will automatically contribute a Canada Education Savings Grant of 20 percent of what you put in up to $500.00 a year to a lifetime maximum of $7,200 for each child.
Furthermore, you can ask your child’s grandparents, relatives or friends to contribute to their RESP on special occasions and milestones. With a lifetime total of $50,000 per child, the investment income that’s earned within the plan is not taxed until it’s withdrawn.
The years following high school graduation is an important time to begin laying the foundation to financial freedom for your child. Unfortunately, not all schools teach these financial lessons and experience is often the best way to learn. Be sure to set the stage as early as possible, and the sooner your start saving for their education, the better.