Financially Speaking

You want your kids or grandchildren to have rewarding lives, both personally and financially, and one good way to help make that happen is to invest in them – through a Registered Education Savings Plan (RESP). In today’s highly competitive world, having a post-secondary education is a definite advantage. According to Employment and Social Development Canada, over the span of a career, higher education means higher growth in earnings. For example, in 2000, growth in average earnings between the ages of 25 and 54 was 49% for those with a high school diploma, 53% for those with a college diploma, and nearly 100% for those with a university diploma.

Yes, a post-secondary education is expensive – in 2010-11, the average cost of a four-year program was approximately $58,000 – and rising every year. But it remains a great investment – that’s why so many Canadians are saving for their kids’ education. Statistics Canada reports that 7 in 10 Canadian children 17 years old and younger had savings set aside for their post-secondary education and more than three-quarters of those with savings had an RESP.

Here’s why an RESP is a great way to invest in your kids:

• You can contribute as much as you want each year up to a lifetime limit of $50,000 per child – so you can manage your contributions according to your annual budget.
• For each child’s RESP, the government will add up to 20% of contributions (to a maximum of $1,000 each year, and up to a lifetime grant limit of $7,200), via the Canada Education Savings Grant (CESG) program.
• Lower income families may be eligible to receive additional CESG amounts as well as the Canada Learning Bond (CLB).
• Your contributions aren’t tax-deductible and withdrawn contributions by your enrolled child aren’t taxed. Educational Assistance Payments, which consist of CESG, CLB, and plan income or growth, are taxed at the student’s income level, meaning your child will likely pay little or no tax on those withdrawals.
• Your child can access RESP funds as soon as they enroll in an approved post-secondary program.
• If your child decides not to pursue a post-secondary education, contributions may be returned to the RESP subscriber or the RESP can be transferred to another child.
• Any contributions remaining in the plan after your child finishes their education are yours to use as you wish.

Investing in a RESP is a good decision and your professional advisor can help you achieve financial stability for you family and a debt-free education for your children or grandchildren.