Do you keep meaning to open an RESP for your kids but never quite get around to it? The earlier you can start saving for your children’s education, the better. But don’t fear if you haven’t been a keener, it’s never too late to get started! Here are some great reasons why it’s worth getting started with an RESP today.
1. Flexibility and control.
When you open a familyl plan RESP, it’s entirely up to you when and how much money to contribute, up to a lifetime limit of $50,000 per child. And whether you have one or many you have the flexibility to share saving between them. In a year where money is tight, you can put in less money, or hold off on contributing altogether, giving you full control to match your savings to your life circumstances. Unused contribution room is carried over to future years, so you never lose the opportunity to put in more.
2. Government grants that match your contributions.
The very best reason to open an RESP is that the government will match a percentage of your contributions! Any money you put in, up to $2500 per year, will be matched at 20% by the federal government. If you can contribute the full amount for every child you’re saving for, that means you’ll will receive an additional payment of $500 a year for each child!
Lower-income families may also qualify for an additional grant issued every year they remain eligible, independent of contributions.
3. Long-term growth, tax-free!
Money in an RESP, along with any applicable government grants, will continue to grow in interest and investment gains, year after year, tax-free! And with our tailored investment plan we will automatically adjust the investments to best suit your timeline. Of course, the funds will be taxed when your child withdraws it for school, but since they are not likely to be earning significant income when they start post-secondary studies, the tax rate will be minimal.
The earlier you can start saving in an RESP, the longer the funds will have to compound in growth.
4. Make it a family affair.
Saving for post-secondary can seem like a daunting task, but sometimes a little extra help is all you need. Grandparents and other family members and friends are often more than happy to contribute towards an RESP in lieu of toys and other gifts for special occasions, and the great news is, then can! Whether through co-contributions in one plan, or opening an additional plan for your child, just keep in mind the maximum limit is per beneficiary, not per plan. And depending on their age, your child can even start contributing to their RESP themselves, whether it be from job earnings or birthday money. As a result, you may find it easier than expected to save for your child’s future.
5. Multiple paths for the future.
Not exactly sure what path your child might choose? Saving in an RESP regardless of what they decide still provides you with lots of options. If your child decides not to pursue post-secondary education, there’s no rule that the money must be used immediately after high school – you can keep an RESP open for up to 35 years, just in case they change their minds. A family plan gives you even more options, with the ability to share your savings and earnings between children, so if one pursues a four year degree and another an 18 month one you can help both according to their needs. And there are lots of post-secondary options available to choose from. At the end of the day, if not all the RESP savings get used by your children, you can withdraw your contributions tax-free and move any left over earnings to your RRSP if you have room.
There really is not a better way to save for your children’s education than through RESPs. With benefits like flexibility, control and a boost to your savings by the government take advantage of these benefits today to help create tomorrow!
Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.