Easy as R-E-S-P: How to Save for Your Child’s Post-Secondary Education
From the moment you see a positive reading on a home pregnancy test; the second a blood test confirms your pregnancy; or the first time your baby is spotted wiggling around on an ultrasound, planning for your family’s future becomes a real, tangible goal.
Couples often romanticize about the idea of expanding their families, rushing to department stores to register for all things baby. In the midst of choosing colour palettes, furniture and the latest gadgets, thinking about your child’s financial future should also be considered. And it’s never too early!
National Education Savings Weeks runs from November 19-25th. As part of this week dedicated to saving money for students, parents and caregivers are encouraged to have conversations with their children to discuss the importance of their education and future goals. Now that the cost for a four-year degree has crossed into the six-figure territory, tuition sticker shock can easily set in, especially if you don’t have a financial plan. The idea is to start saving early and contribute often. It’s easy as R-E-S-P!
Open an RESP: The first step is to open a Registered Education Savings Plan. Families can easily save for a child’s post-secondary education – up to $50,000 per child can grow tax-sheltered until it can be withdrawn by the beneficiary (your child). Heritage Plans are flexible so there’s no locking into a contribution schedule. It can be changed and customized throughout your contribution period.*
Each child is eligible: With an RESP, you can easily transfer contributions from one child to another within the family.* Canadian families may also qualify to take advantage of the Canada Education Savings Grant. When you contribute up to $2500 in an RESP, the government will contribute 20 per cent of the first $2,500 to your RESP for each child up to and including the year when he or she turns 17. The simple breakdown means for every ten dollars you save, the government will add two bucks, with a maximum lifetime of $7,200.
Save early: Starting to save early means your children will have a better advantage as you watch your money grow over time. Ideally, saving early and contributing often is the best plan but there are often life challenges along the way. Don’t fret- slowly growing your child’s nest egg will help pave the way for a much less bumpy financial ride after high school.
Parents don’t have to be sole contributors: Instead of the latest toy or gadget, why not ask close family members and friends to add to or open an RESP? Anyone can open one and designate a child as a beneficiary. Grandparents often choose this option to help build financial stability for the grandchildren’s future.
As parents, we want the best for our children and strive to give them more than we had as kids. Saving for their future will help give them a financial boost when they’re ready to choose their educational path and ultimately, give you and your children peace of mind. Remember, any contribution is valuable, big or small. Happy Savings!
*Some conditions may apply