Invest in your child’s future with a Registered Education Savings Plan

RESP Guide

When your kids are young, it seems like post-secondary education is in the far-away future. But college and university are more important than ever, if we want our children to be successful.

And yet the cost of a post-secondary education keeps growing. In 2016/2017, the average annual undergraduate university tuition in Canada for a full-time student was $7,437, compared to $4,025 in 2003/2004.

Tuition and related fees are not the whole story. They represent only about one-third of the expenses that students face each year. Add in accommodation, food, transportation, books, computers, leisure, and the cost of a four-year postsecondary education could add up to more than $80,000.

But there is way to meet these rising costs. By setting aside education funds for your children now, you can help them earn a university or college degree and avoid the crippling debt many students are incurring.

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Top 5 RESP tips

1. Start early and make it automatic. Through Pre-Authorized Chequing programs (PACs), small amounts of money are automatically withdrawn from your bank account and invested on a regular basis. The money set aside in an RESP has the potential to grow and compound regularly.
2.Talk to your financial advisor about the best plan for you. You can choose between an individual or family RESP. Any one child can be the beneficiary of an individual plan but a family plan can provide greater flexibility when it’s time for education withdrawals.
3.Maximize your CESG amount. Try to contribute at least $2,500 a year to get the maximum grant. Also, take advantage of carry-forward CESGs if you contribute less in any one year. A total of $1,000 of CESG can be paid in any one year.
4.Don’t withdraw your contributions from an RESP. If you take back your contributions before your child starts attending post-secondary school, a proportional amount of the CESG must be paid back and CESG contributions can be suspended for two years. Try to leave money in the RESP where it will grow to pay for your child’s education.
5.Have a back-up plan in case your child doesn’t attend university or college. Review the section on “What if your child doesn’t pursue post-secondary education?” Some options are better than others depending on your circumstances.

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