If you’ve got children, you’ve likely put some thought into their future—ok, probably a lot of thought!—and may have designed your monthly budget around their needs. In addition to ongoing family costs like groceries, clothing, rent or a bi-weekly mortgage payment, you may have invested in (or considered investing in) an RESP in their name. Registered Education Savings Funds are an excellent tool that works well for many families—but don’t forget to consider your own needs for the future, too. Saving for education is important, but so is your retirement. Neglecting your own financial future can have serious consequences, and you don’t want to strike the wrong balance. So, where do you start?
There’s no one-size-fits-all answer to these big financial questions, but there are general guidelines to follow and points to consider when making investment decisions. An Interior Savings advisor can offer personalized financial advice, but here are a few thought starters related to your registered investments. Remember, our advisors are available to walk you through these questions and help make the best possible decision for your goals and budget—please contact us to learn more!
Questions to ask yourself
Each individual and family’s financial situation is unique—not only do they have different assets and debts, they have unique needs and goals to consider. Personalized financial advice is critical to reaching your specific goals, but there are a few universal questions that can be helpful to ask yourself.
- What is my timeline for a) retirement and b) post-secondary education costs?
- Do I want to cover all of my child(ren)’s education costs, or simply contribute to them?
- What do I want my retirement to look like, and how much income will I need?
- Aside from what I contribute to an RRSP, what income am I guaranteed in retirement? (For example: OAS, CPP, a private pension via an employer.)
- What income is my spouse guaranteed to receive? (Note: because not every marriage is forever, a second income is a consideration for not a guarantee.)
- Am I likely to inherit money, and would that impact my retirement plan? (Note: an inheritance is never guaranteed, so this is a consideration but not something you should depend on.)
- Do I own a home, and is the value of that property part of my retirement plan?
- Will my retirement overlap with my child’s post-secondary education?
- What unique factors impact my retirement plans?
- What unique factors may impact my child(ren)’s education costs?
Yes, this is a lot to take in—but asking yourself these questions can help determine what your priorities are and what may impact your plans for the future. Better yet, discuss these questions with your advisor!
In addition to the questions listed above, you’ll want to consider the number of children you have, where they’re likely to attend college or university (locally, in another province or internationally), if more than one child will require financial support at the same time, and any consistent career and/or study interests your children have expressed (for example, medical school vs a Bachelor of Arts vs getting into a trade).
Your children may waver in their career direction or consider several different academic options—that’s normal!—but it’s best to consider the path they’ve expressed interest in taking. This is especially true with teens who are getting close to embarking on this next chapter, but less important if your children are very young (your four-year-old may not want to be a veterinarian forever, sadly). Use your best judgement to determine what’s likely, but know that nothing is set in stone—not even once they’ve started college or university. After all, plenty of students change their major midway through their post-secondary career!
Where to invest now
As a parent, your children are always going to be your first thought and top priority—but that shouldn’t mean putting your own future at the bottom of the list. At the end of the day, many advisors recommend prioritizing your retirement savings over your children’s education fund for practical reasons. However, Interior Savings can help you create a balanced budget that allows you to contribute towards both financial goals. The percentage of your savings allocated between each registered investment account will depend on several personal factors, but generally speaking, it’s possible to save towards retirement and education costs at the same time.
Think of it this way: your retirement needs to be top of mind because one day you’ll be unable to work or uninterested in working any longer. If you reach this point without adequate retirement savings, there’s no equivalent to a student loan to fall back on. Without retirement savings to fund your senior years, you won’t be able to enjoy a high quality of life as you age. In some cases, this may result in you leaning financially on your kids—not exactly the financial support you intended on giving them by investing in those RESPs! Knowing this, your retirement should always be a high priority. We know it’s not your only priority, however, and are here to ensure that all of your financial goals are reflected in your budget and investments. Please reach out to our team to get started—we look forward to working with you.