Registered Education Savings Plans – RESP’s
Helping to fund a child’s post-secondary education is one of the most important investments you can make in his or her future, especially in today’s competitive environment where a good education is crucial to success. Yet, with the rising cost of tuition fees and living expenses (estimated to be $117,000* for an average 4 year program in 15 years!), personal savings alone may not be enough to cover the cost of higher education. Add to this, investment challenges such as low interest rates and market uncertainty and the task becomes daunting.
Fortunately, you can receive a guaranteed 20% return on your RESP contributions (some conditions apply), in the form of the federal government’s Canada Education Savings Grant – CESG. For example, you contribute $2,500 every year to your child’s RESP and the government will contribute $500 (to a maximum of $7,200! There are also additional grants available if you qualify). This is an opportunity that should not be missed! The other good news is if you have missed making contributions to an RESP, the grant room is carried forward and you can double up your contribution each year to catch up and get double the CESG!
Many parents have shied away from RESP’s because of the bad press some of them received concerning exorbitant enrollment fees and surrender charges levied by some unscrupulous RESP promoters – so-called scholarship plans. Today, there are many reputable providers, where there are no such concerns.
Should you be in the desirable position of having maxed out your savings into your child’s RESP, another great way to fund education is through a Tax Free Savings Account (TFSA) in your own name. These dollars also grow tax free to provide the next biggest bang for your education buck!
For more information on RESP’s, please click on the following links and talk to your advisor.
*Source: Clair O’Hara, Grappling with the growing cost of education, Investment Executive, July 11, 2012
