Leave Room in your Holiday Budget to Top up your RESP
Do you regularly contribute to your child’s RESP? Give yourself a round of applause and a pat on the back. You’re doing a great job helping your child attain a brighter future by attending higher learning.
The holidays can be an expensive time of year. With the festive season coming up, you can have good intentions of contributing to your child’s RESP, only to find you overspent on the holidays and don’t have enough money left over to make those contributions. Don’t let this happen to you.
Here are three ways to leave room in your holiday budget to top up your child’s RESP.
Create a Holiday Spending Budget
Do you have a family budget? Kudos to you! You’re ahead of many Canadian families. Do you have a holiday budget? No? Not many families do, but here’s why you should.
A common approach for budgeting towards the holidays is to simply write a gift amount in your monthly budget. Gifts are infrequent purchases. We typically spend money on gifts for birthdays, special events like weddings and baby showers and, of course, the holidays. Unfortunately, we tend to underestimate how much we’ll spend on gifts. This can lead to you halting contributions on your child’s RESP to make up the shortfall, which is the last thing you want to do.
A far better approach is to create a budget specifically for the holidays. Start by listing out the people you’ll be buying gifts for – family, friends, coworkers, neighbours, etc. After that, set a spending limit and, I know it can be tough, but stick to it. If you said you were only going to spend $300 on gifts for your husband and children, only spend that much. Don’t spend $500 because the extra $200 will have to come from somewhere. Your children may not mind receiving an extra nice holiday gift, but they might wonder why their RESP isn’t as much as they had expected when it comes time to attend post-secondary education.
Track Your Spending
Setting a holiday budget is fine and dandy, but it’s also important to track your spending. Again, if you plan to spend $300 on holiday gifts, but end up spending $500, then you’re no further ahead (you’re actually farther back). By tracking your spending, you can see how close you are to your budget spending limit, so that you don’t go over. You’ll be glad you didn’t because then you’ll still have money to contribute to your child’s RESP.
Set an RESP Contribution Goal
Instead of making savings your last priority, make it your first priority. How do you do that? By setting an RESP contribution goal and automating your savings.
You can contribute up to $2,500 annually to your child’s RESP that’s eligible for the 20% Canada Education Savings Grant (CESG). If you can afford it, contribute $2,500 per year. That’s about $105 per semi-monthly paycheque. Can’t afford $2,500? No worries. Figure out what you can afford and automate your savings.
When you automate your savings, the money is contributed to your child’s RESP before you’re tempted to spend it. And when you plan ahead, you contribute to your child’s RESP throughout the year instead of in one lump-sum at the end of the year at an expensive time of the year the holidays, when you may have little to nothing to contribute.
Don’t you think your child’s education savings deserves to be a priority? We sure do. Wishing you and your family a happy holiday season!