Guest poster Desirée Dupuis gives us the RESP low-down.
When you have a baby you start to think about all of things you want for them and their future. For most parents, that includes post-secondary education and being able to provide this for your children.
As you know, a college or university degree is not cheap – it requires a lot of money. My parents paid for my degree from UVic, which also included all of my dorm expenses for living in residence and for my semester abroad in France. Had it not been for my parents’ financial planning, who knows where I’d be today and if I would have even been able to go to school.
The government does do some nice things for us every now and again. One of those things is the Registered Education Savings Plan (RESP) system. The two main benefits of an RESP are:
- The money you invest in an RESP will be taxed in your child’s hands when they withdraw the money to pay for school. Since most post-secondary students have minimal income, this means that they will likely pay little or no income tax. Also, since the money inside the RESP is tax sheltered, you do not pay any tax on the growth – how nice!
- The government will pay you a certain percentage of what you invest into your child’s RESP – this is known as a grant. You could receive up to $600 per year for free from the government to add to your child’s education savings. The total amount of grant money the government will give you is $7200 – a pretty nice bonus just for planning your child’s future! That is a ton of money, and if it is invested early and properly, this amount could grow significantly.
If you have children and dream of them pursuing a post-secondary education, I suggest speaking to a financial advisor about opening up an RESP account as soon as possible. The earlier you start, the more time your money will have to grow. By the time that your child graduates from high school – thanks to the magic of compound interest – they will have more money to pay for their education.
Desirée Dupuis is a Licensed Financial Advisor and Partner of Three Sixty Financial Group. Desirée provides financial eduction to young families and empowers moms to make the best decision for their family’s financial future. You can find her on Facebook and Twitter.