Maximize your RESP growth!
According to statistics Canada, the cost of a 4-year post-secondary is reported to exceed $166,000 by 2032*. To help you prepare for this substantial expense, and lower the financial burden for your child, here are some ways to maximize your RESP growth.
The key is to start early, and let the power of compound interest grow your RESP. The earlier parents start their contributions, the more the plan will grow over time, which could also mean more government grant money.
Open a Plan and Contribute Regularly
Setting up an RESP is easy in the beginning but don’t forget that it is a long term commitment which requires you to make contributions and re-evaluate regularly. Set up a plan and determine how much you need to contribute to meet your financial goals. You may end up using an unexpected amount of personal savings to pay for the rest of your child’s education.
Take Advantage of the Government Grants
With an RESP, you may be able to receive government grants, such as the basic and additional Canada Education Savings Grant (CESG)**, Canada Learning Bond (CLB)**.
Basic CESG**: The Canadian Government tops up your annual RESP contributions by 20%, up to $500 per year and up to a lifetime maximum of $7,200 per eligible child.
Additional CESG**: Qualifying families may receive up to 40% on the first $500 of annual RESP contributions. Both the basic and additional CESG have a combined total lifetime maximum of $7,200 per eligible child.
Treat It Like An Investment Account
Take advantage of time and invest in growth-oriented investments when your child is young. When they grow older, focus on steady growth so the investments do not fluctuate in the final years of their plan, before they enter post secondary education.
Remember, the key is to start early, save often and stay invested.
* This amount is calculated using the average annual increase in the total cost of tuition and the average annual increase in the cost of accommodation, books, transportation and meals from 1995/1996 to 2006/2007 (5.69% and 4.53%, respectively). Source: Statistics Canada.
** Certain conditions apply. See prospectus for full details.