Now Your Kids Have Gone Back to School….Let’s Think RESP’s

Start thinking about your children’s future

by David Broudie
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Summer came to an end, September rolled around quickly and your children are back in school! This is a good time to start thinking about your children’s future and the benefits of investing in an RESP. Planning to help your child attain a higher level of education and the financial burdens that your child will face while doing so, is one of the greatest gifts you can give to your child. As we all know, the tuition costs along with the cost of living are increasing, making it harder and harder to afford attaining a post-secondary education, not to mention the costs that come along with it – rent, books, course material, etc. The earlier a parents starts their child’s RESP contribution, the more the plan will grow over time.

Currently, the cost of a student’s four-year education at a Candian University is between $30,000 to $35,000 while living at home. Living on residence or off-campus, renting their own space, that cost is $55,000 to $60,000. Now, think ahead to year 2030, with the rise in the standard of living and tuition fees, we could be looking at closer to $50,000 while living at home and $90,000 living out of the home. Perhaps putting some money into a savings plan each month would make things easier in the long run for both the parents and children.

One major advantage of RESP contributions is that Canada Education Savings Grant (CESG) – for every dollar contributed, the Federal Government will provide 20% in CESG, up to $500 annually to a maximum of $7,200 per RESP beneficiary. This is basically free money for your child that will help them in the long run.
All income in RESPs are tax-sheltered. This means that the money grows tax-free and income is paid as Educational Assistance Payments to RESP beneficiaries and will be taxable upon extraction, and usually at a lower rate because of the expected low income rate and high exemption status of most students at the time that they utilize the contributions. RESP contributions can also be utilized as growth-oriented financial investments. Utilize that money while it is sitting there to work for your family.

Not only does an RESP eventually help your child’s financial debt that they carry post graduation, but it also reduces the financial burdens that parents typically face upon enrollment. When your child is at the point where he/she is enrolling in post-secondary education, you, as parents will not be burdened with the tuition costs or the guilt of feeling that you had not properly prepared for those times. An RESP will help reduce the demand and avoid the high costs because you had properly prepared for it, and it will also help your child graduate with less or no debt at all.

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