Another School Year... Another Year Closer to College.
Do You Have a Financial Plan?
September 13, 2012
With new binders, bright pencil cases, and clean lunch boxes tucked into their backpacks, kids are back to school and the wee ones are starting kindergarten. Everyone is settling into their Fall routine, but what about your child’s future education? While the prospect of university and college may seem far off in the distance, to be ready financially, planning should start now. It will cost more than $80,000 for a four-year university degree by the time babies born this year begin to enter college.
The good news is with a little planning ahead while the kids are young, you’ll be able to give them the support they need later. A Registered Education Savings Plan (RESP) should be a central part of your family’s financial plan. When you bank at Libro, every RESP comes with a Coach. Your Libro Coach will help you set one up, determine how much you can contribute comfortably, invest wisely and help you stay on track over time. Our Coaches take time to get to know you and your kids personally. We help you adjust as life changes.
Following are more details on RESPs:
- Through the Canadian Education Savings Grant (CESG), the Canadian government contributes an additional 20% of RESP contributions to a yearly maximum of $500 per child.
- Each year, you can contribute $2,500 per child to an RESP (a little over $200 per month per child).
- There is a lifetime limit of $50,000 per child.
- Although contributions are not tax deductible, all interest earned through an RESP is tax free (money paid out to the student is taxable to the student at normal income rates).
- The beneficiary of an RESP must be a Canadian resident with a SIN.
- An RESP needs to be used for post-secondary education at a qualified program.
- If your child chooses not to go to school, you still have the savings, but the RESP must be closed and the funds withdrawn and moved. There is no penalty but the government grants must be paid back.
Opening an RESP is not only a great way to save for kids’ futures, but it’s also a useful tool to teach them about money and savings. Get them involved in the process and together you can learn budgeting and saving for the future. Whether your child chooses university, college, or a trade school, getting them to think about their education from an early age lets them know what options they have and gives them a goal to work towards.
However you choose to save for your child’s education, having a plan means that the dollars and cents of it won’t overwhelm you when the time comes for the ultimate back to school shopping.
What are some ways you save for your child's education? Let us know in the comments below.