Registered Education Saving Plans (RESPs), special savings accounts designed to set money aside for a child’s post-secondary education, are one way to help lighten your child’s future financial load (today’s average graduate carries $27,000 in student debt).
The good news? A post-secondary education is a great investment. Graduates who hold a college, polytechnic or university credential often earn more than people who don’t. The bad news? It’s expensive. Investing in your child’s education after high school could cost, on average, between $6,500 and $7,500 for a single year. That’s just tuition. And if your child decides to leave the nest while pursuing their passion, the costs multiply – often more than double the price of living at home.
Daunting? Definitely. Especially when most parents are also paying mortgages, covering life’s everyday expenses and trying to set something aside for retirement.
Here are a few things to keep in mind as you prepare for your child’s post-secondary education:
Earlier is better – But late is definitely better than never. The sooner you start saving, the more opportunity there is for your money to grow.
Don’t miss out on free money – The Government of Canada, through the Canadian Education Savings Grant (CESG), will give you up to 20 percent of your yearly $2,500 maximum RESP contribution. That’s a potential $500 each year – for free.
Set it and forget it – Line up your contributions with your paydays. If you get paid bi-weekly, set up an automatic transfer. If you can manage to set aside $96.15 each pay cheque, you’ll hit the $2,500 maximum per year and qualify for the CESG.
RESPs offer different investment options, family plans that any child can use and ways for special people in your child's life to contribute. Make an appointment with a Servus financial advisor to see if RESPs might work for you.