Thinking of a great gift for your kids, grandkids, nieces or nephews this Christmas? Have you considered contributing to their Registered Education Savings Plan (RESPs)? While it may not offer that giggly delight upon opening as some toys or trending gifts might, it sure does a lot to help them reach their life goals in the years to come. Long after the batteries have died on their toys or they’ve moved to the bottom on the toybox, a financial investment in their future keeps on growing…and giving!
The gift that keeps giving
We all know that the sooner we can invest, the longer it has to appreciate in value over the years. However, when we are just starting out or have young kids for example, thinking that far ahead into the future isn’t top of mind for many people, especially if they are working on reducing debt or saving for their first home.
I talk to a lot of parents who have kids in high school who are just now thinking about those post-secondary plans and how they will afford it. College and university costs in Canada are growing at a rapid rate. Tuition for undergraduate programs for full-time students in 2019 was approximately $6900, which doesn’t include rent, food, utilities, textbooks, Internet, and so on. Even if you only have a quarter or half of what they might need saved up by the time they head off for their post-secondary education, you’ve given them a solid start. Don’t forget that your children may also be able to fund or top up their education costs with OSAP loans, bursaries, paid work placements, scholarships and part-time employment.
Here’s how it works with RESPs:
- RESP basics
A Registered Education Savings Plan (RESP) is an investment account to save for a child’s education, that allows the money within this account to grow, tax-free. RESPs can be invested in a variety of ways such as GICs, mutual funds, stocks, bonds, etc. What’s special about RESPs is that the Canadian government will top up your contributions (20% up to $500 each year and a lifetime maximum of $7200) through the Canada Education Savings Grant. As you can see, your RESP contributions can really start to add up! The sooner you contribute to RESPs, the more you can take advantage of the annual government contributions. Once the student is registered in college or university, they can start withdrawing their RESP as needed. If your child doesn’t end up choosing post-secondary as their career path after high school, don’t worry, you won’t lose out; there are other positive options for you and your family with regards to that RESP investment.
How to get started
If you are opening RESPs for your own child, you’ll need to make an appointment with a bank, accredited lender or certified mortgage broker who specializes in RESPs and other investments. You’ll need your child’s Social Insurance Number as well as your own, and birth certificates for each child. You can set up a direct savings plan where the funds come out automatically, and/or leave it open for occasional contributions. Anyone can contribute to an RESP as long as they have the child’s account information, and naturally the parents’ permission.
While you can still give the kids something fun to open under the tree, don’t rule out the long-term benefits of a RESP contribution to either your own children, your grandkids or other kids in your life. Make it a holiday tradition, no matter how small the amount. Helping our kids to achieve their educational goals (while helping them avoid the huge debt that comes with it) is a true gift indeed.
This holiday season consider giving something different, that won’t be long forgotten in years to come. To learn more about RESPs and other investments, connect with me and we’ll get to work on a financial plan that truly works for you. Make an appointment by calling (705) 315-0516; and best wishes for the happiest of holidays.