As a parent, there are many things that you need to plan for in order for your children to have a comfortable life. Everything requires financial planning, from your child’s health to their education and extracurriculars. Many parents planning for education might stop with secondary education, but it is important to also consider post-secondary education. Many children might want to pursue careers that require a post-secondary degree or might even just want to stay ahead in the highly competitive job market.
Post-secondary education is becoming increasingly expensive with every passing year. In 2016, students had to pay 40% more than they did in 2006, and the fees have only been rising ever since. Even during the COVID-19 pandemic when classes went online, several universities raised their tuition fees. Students are constantly stressed about how they can save money in college. The problems causing this constant increase will take a long time to tackle, and it may be some time before the situation improves. This scenario, coupled with the current slow employment prospects, makes for a perfect case for you to seriously consider the future of education and save for your children accordingly.
Here, RESP government grants can be of immense help. You can start your RESP or Registered Education Savings Plan by simply going to a bank or credit union and opening an RESP account in the name of your child. Even grandparents can do this for their grandchildren. Here are some more things you should know about RESPs.
Post-secondary education only
RESP funds are sponsored by the Canadian government to encourage people to invest in their children’s post-secondary education only. If a child doesn’t enrol in and pursue post-secondary education within 36 years of opening an account, the government might request for the grant money to be given back. The contributions to RESP are tax-free but any withdrawals made from the fund that are not for college will incur penalties and income tax on investment earnings.
Opening an RESP account is easy
You can open RESPs from either financial institutions like banks, credit unions, investment firms, mutual fund companies and trust companies, or scholarship plan dealers that only sell RESPs. All you need is the social insurance number of your child and an RESP application from the financial institution.
How it works
After creating an RESP, all you need to do is deposit money into the account and the government will match 20% of the deposit through Canada Education Savings Grant (CESG), up to an annual limit of $500. The RESP funds can be used by your child for a number of colleges.
RESPs are a great way to have a tax-sheltered investment while also saving up for your children’s post-secondary education. If you have more than one child, you can start a family RESP fund. Some provinces might even add additional funds in the account on top of the ones provided by CESG. Make sure you research the provincial government policies. While tuition fees are expensive, RESPs make extended education affordable and achievable.