Is a RESP on Your Back to School Shopping List?
If not, then maybe it should be. Saving for a child’s education is important because it encourages younger generations to pursue a college or university degree while relieving some of the financial burden associated with higher learning. Investing in a Registered Education Savings Plan (RESP) helps you achieve the financial goal faster.
Now that it’s time for back to school let me ask you a question, how would you spend $26,819? According to The National Post, that’s the amount of debt your child may owe in student loans after graduation.
In fact, debt has become such a source of stress for students that some universities have started to invest in programs to help students deal with the mental health issues that student debt can cause.
Back to school is the perfect time to start a budget
Now is the time to start thinking about money and wondering if your child will have enough for school essentials such as a laptop and textbooks - on top of tuition. A RESP can help plan – and pay for – expenses. Parents and grandparents can open a RESP and supercharge your savings by accessing free educational grant money from the Canadian government and tax-free investment growth.
Here’s how a RESP can help save for back to school:
Starting early comes with savings benefits
Whether you have one year, 10 years or 17 years to save you can always help your child get ahead by giving them a financial opportunity.
If you start saving for your child’s education from birth, you may be eligible to receive up to $8,500 by the time they turn 17 through the Canadian Canada Education Savings Grant(CESG). Additional government assistance is available to modest-income families through the Canada Learning Bond.
It’s also never too late to start saving
If you didn’t have the financial capacity to start saving at an early age, it’s OK because you can carry forward your grant room on contributions up to $5000 per year. It’s important to define your savings goal based on your income. If you can afford it, you will maximize the annual $500 CESG by investing $2,500 per year into an RESP.
If your child is working part-time, consider asking them to contribute their own RESP. This helps to ensure you take full advantage of the government grants and teaches your children financial responsibility at the same time.
Money is such a big part of attending college or university and although financial aid may be available, you can ensure your child accepts their acceptance letter by saving for their future with an RESP.
If you want to help your child transition to adulthood without the added stress of debt, let’s talk about saving for back to school with an RESP.