Little boy, breaking his piggy bank to buy gift

Make An RESP Your Education Savings Blueprint

Did you know that this week is National Education Savings Week in Canada?

Young people face many challenges  – precarious employment, skyrocketing living expenses, and rising student debt, of course. Today, the average student graduates with $27,000 of debt. Too much student debt can mean delaying life milestones like buying your first home, getting married and starting a family.

For parents looking to give their children a helping hand with their education, RESPs are the way to go.

Why Save in an RESP?

An RESP – short for Registered Education Savings Plan – is a registered account specifically set up to save toward your child’s post-secondary education. To encourage parents to save toward college and university, the government offers a financial incentive. When you contribute to your child’s RESP, you’re eligible for a 20 per cent government top-up, provided you qualify. That’s essentially free money, and is akin to an instant 20 per cent return on your investment. By contributing $2,500 per year to your child’s RESP, you can reap the full reward of the Canada Education Savings Grant (CESG) and be eligible to receive the full $500. Parents can contribute a lifetime maximum of $50,000 toward their child’s education and be eligible of a grant of $7,200 before their child reaches 31 years of age. The beneficiary may also be eligible for the Canada Learning Bond, which provides up to $2,000 per child for qualifying families.

Aside from the government grant, the other major benefit of RESPs is the preferential tax treatment. Although parents don’t receive a tax refund like RRSPs, the funds grow tax-sheltered until withdrawn, upon which time it’s taxed in the hands of the student. This is beneficial, since students typically have little-to-no income when they’re attending college or university, so it’s likely with the Tuition, Education and Textbook tax credits, your child won’t need to pay any income tax.

Other Advantages of RESPs

RESPs are flexible. A variety of full-time and part-time schools and programs are eligible for RESP withdrawals. This includes universities, community colleges, CEGEP, private vocational schools, distance education and correspondence courses. If your child decides not to pursue post-secondary education, no problem. You can transfer the money to another child, transfer it to your RRSP (or RDSP), or even withdraw it as income as a last resort.

Parents aren’t the only ones who can lend a helping hand with RESPs. Grandparents, other family members and even friends can all make RESP contributions.

Trust the RESP experts

Companies like Heritage invest your money in lower-risk securities such as Guaranteed Investment Certificates (GICs) and corporate bonds, which typically earn a competitive, risk-adjusted return. This provides your money the opportunity to grow in a stable, non-volatile environment.

Other investment options include Canadian equities, as well as US and Canadian Exchange Traded Funds (ETFs). All of these investments come with low fees to help your child’s money grow that much faster.

The children are our future. Take advantage of RESPs today and provide your child with the blueprint to make theirs a bright one.