Now Your Kids Have Gone Back to School….Let’s Talk RESP’s
With Mark Kenny
Summer has come to an end, September has rolled around 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 is one of the greatest gifts you can give to your child. As we all know, the continuous rise of tuition fees along with the increased cost of living, make it harder and harder to afford a post-secondary education. Not to mention the costs that come along with it – rent, textbooks, course materials, etc. The earlier you start contributing to an RESP, the more the plan will grow over time.
Here’s how RESPs work
RESPs provide tax advantages to help you fund your child’s post-secondary education:
- For every dollar contributed, 20 cents of Canada Educational Savings Grant (CESG) is added (subject to annual and lifetime maximums).
- Savings can grow tax-deferred.
- Withdrawls from an RESP are taxed in the hands of the beneficiary. When your child begins post-secondary education, the money can be withdrawn in your child’s name. This amount will be tax in your child’s hands, potentially at the lowest marginal tax rate – or not at all.
Here’s how you can combine Government grants to potentially build substantial education savings.
Invest your child’s enhanced Universal Child Care Benefit (UCCB) of $160 per month until age six and $60 per month thereafter through age 17. Set up a monthly Pre-authorized Contribution (PAC) for the amount of your UCCB into a Registered Educational Savings Plan.
Potential RESP savings over 18 year period using Government Grants
|Invested Universal Child Care Benefit (UCCB)||(6 years x $160/month) + (12 years x $60/month) = $20,160|
|Canada Educational Savings Grant (CESG)||($0.20/dollar contributed) = $4,032|
|RESP balance after 18 years (assuming a 7% annual rate of return)||$56,005|
So, as you can see, investing early, brings big benefits. If you would like to talk to me about setting up an RESP for your child, please call me at (902) 466-3900, or email me at firstname.lastname@example.org. There’s no better time to start saving.