It’s never too early to start thinking about your child’s future, and with the cost of education rising each year, helping your child pay for his or her postsecondary education is likely on your mind. We’ve discussed money-smart withdrawal strategies for RESPs before, and if you’re not already saving for future education, here are several reasons to be opening and building up an RESP for your child’s postsecondary education.

RESPs aren’t just for university.

Even if your child isn’t sure exactly what educational path to pursue, RESPs can be used for a diverse array of postsecondary education programs. From apprenticeships to out-of-country programs, checking to see whether your child’s chosen program is eligible is simple.


Government grants will supplement your RESP

The Canada Education Savings Grant is a great government program to take advantage of as you’re contributing to your child’s RESP. The basic CESG is available up until the year your child turns 17 and will provide 20 cents on every dollar you contribute, up to a maximum of $500 on an annual contribution of $2,500, up to a lifetime maximum of $7,200. Depending on your family net income, your child may also be eligible to receive the Additional Canada Education Savings Grant (A-CESG), which would add an additional 10% or 20% to the first $500 put into the RESP each year.


RESP earnings are tax free

You won’t pay tax on any interest payments, dividends or capital gains earned in the RESP, which allows you to worry less and grow your savings faster.


Anyone can contribute to the RESP

An RESP for your child can be set up and contributed to by anyone, and with friend and family contributions, you’ll watch the RESP grow more quickly. On special occasions such as birthdays, encourage monetary gifts that can be tucked into your child’s fund.


RESPs let you play catch up

Say your child is three when you finally open an RESP – you still have the opportunity to make up missed investments from those years so you won’t lose out on the government grant. You can only make up missed contributions one year at a time; however, meaning on top of the $2,500 maximum contribution, you can make additional payments of up to $2,500 to catch up on the first three years. If you can make both maximum payments of $5,000 three years in a row, you’ll be caught up by the time your child is six.


The RESP is available even if your child defers postsecondary education

RESPs are flexible and if your child chooses to defer their postsecondary education plans after high school, they can still depend on the RESP money when they are ready to pursue further schooling. In fact, your child’s RESP funds can be used for their education for up to 35 years after account was created (but be sure to review your RESP for restrictions on waiting to continue education).


It’s an investment in your child’s future

Education is increasingly becoming more difficult to pay for, so planning for your child’s education in advance will not only ease the burden on you and them in the future, but will ensure your child has the means to succeed and pursue whatever path they choose without needing to rely on loans. Plus with a fully funded RESP, the financial demands on you should be little to none once your child has reached postsecondary age.


Overall, RESPs are a smart and reliable method of planning for your child’s education. To speak to an experienced wealth manager about the best ways to begin saving in your child’s RESP, contact Rae Lipskie today.

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