I’m sure just about every parent wishes they could put some money away for their kids’ education. I found out the federal government has made it ridiculously simple to squirrel away money for post-secondary education.
You’ve probably heard of Registered Retirement Savings Plans (RRSPs). Now the government has also created Registered Education Savings Plans, or RESPs. They’re basically tax shelters for education savings.
Setting up an RESP is as easy as setting up an appointment at your bank or credit union. They’ll need some basic information like your child’s social insurance number, but it can be set up in a single appointment.
If you receive the National Child Benefit Supplement the government will automatically contribute $500 to your child’s RESP.
Two Children? Two RESP? $1000. It’s that easy.
As long as you continue to receive the benefit for your child, the government will put in another $100 into every RESP every year. Assuming you receive the benefit until your child is 18, that’s $2,200 just for setting up the RESP. With compound interest at a rate of 3.5 per cent, you’ll have $3,187 when they go off to college or university.
It’s better than nothing, right?
Then you have the option of putting your own money in, if you feel like it. You can put in as little or as much as you want. You can even ask the bank to set up automatic withdraws straight off your paycheque.
Lets imagine you get paid every other week, and you ask the bank to take $25 off each paycheque for the RESP. If you’re either bit comfortable, you probably won’t notice $50 missing at the end of the month.
If you start when your child is born, and receive the initial $500 plus $100 each additional year, the RESP will be worth nearly $17,000 by the time your child is ready for college.
With inflation, it is hard to tell how many semesters of college that will get a kid in 2028, but again it’s probably better than nothing.
If your child is already 5 or 10, it’s still not too late to start.
And because the money will be withdrawn in your child’s name, and because 18-year-olds don’t usually pay much in taxes, the money will likely go to them tax-free.
If you have questions, just google RESP or check with your bank. I’m glad I did.
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