Home repairs, mortgage payments, retirement savings, utility bills, groceries and so much more. It's a juggling act for the average family to pay it all on time, every month. So, understandably, a savings plan for your child(ren)'s education sometimes falls to the wayside.
I've been there - trust me, it took us years to start saving for our two kids. Although we had been saving a few bucks here and there since our son was a toddler, we didn't put any money into a formal Registered Education Savings Plan (RESP) until a couple of years ago. I didn't start making regular, twice-monthly payments from my bank account until this year. And my kids are 10 and 12 (almost 13)!
Here's the thing, though. The Canadian government gives you free money - 20 cents for every dollar you put into RESPs (up to $7,200 per child)! Free! I have always thought it's a wondrous thing, but often felt we just didn't have the extra money for RESPs. But recently it struck me - the kids will be going to university in a few short years (that's the hope anyway) and every dollar I have to scrounge up for tuition, books, food and housing then will be without the benefit of that free 20 cents! That's 20 cents times many thousands of dollars, times two kids!
I'm no financial advisor, but with mortgage rates still low, I'm thinking it might be a good time to forgo the extra mortgage payments (or even reduce your monthly mortgage payment) and put some money into RESPs.
Don't feel guilty if you haven't started saving yet - we're all doing the best we can as busy parents. But, if your kids are small, think about the advantages of starting early, even if it's just $100 a month. Here are some facts to get you thinking about RESPs and how they might benefit you.
What is an RESP?
The RESP is a tax-sheltered education savings account, registered by the Government of Canada, that can help you save for a child's post-secondary education. You don't get to deduct the money from your earnings come tax time like you do with RRSPs, but you do get that 20 cents per dollar added on to your investment, and the money grows tax-free until your child withdraws it.
Get Grandparents to Contribute!
If your kids are babies or toddlers, consider asking family members to contribute to their RESPs in lieu of birthday and Christmas gifts. All those toys will end up cluttering up your house anyway! Trust me, I've got the messy basement storage room to prove it! If your kids are a bit older, perhaps you can persuade them to put a portion of their birthday money towards education savings.
Choose a Plan That Suits Your Family
If you have more than one child, a family plan is ideal. That's what we chose. You can name one or more children to receive the savings come post-secondary time and the earnings can be shared among the children. Read about other types of plans here.
Canada Education Savings Grant
The Canada Education Savings Grant is the money the federal government adds to your child's RESP (up to a maximum of $500 annually if you contribute $2,500). If you don't make a contribution in any given year, you may be able to catch up in future years. After high school, your child can withdraw the money to help pay for either full-time or part-time studies.
Keep Your Savings in Your Pocket With Wealthsimple
The experts at Wealthsimple can help you kick your RESP savings into gear. When you invest with Wealthsimple, your savings stay in your pocket, not in the advisor's pocket. Did you know that Canadians pay the highest investment management fees in the world?
Wealthsimple is an online investment manager, offering one of the lowest fees in Canada. They specialize in providing low-cost and simple investing to Canadians. Wealthsimple's mission is "to make smart, simple, low-fee investing accessible to everyone, regardless of net worth or financial knowledge." They even have a handy online pricing calculator so you can see what your investment will cost in terms of fees.
Read more about the team at Wealthsimple and how they can help you make the right investment choices for your family.
Have you started investing in your child's education?