The end of summer marks the beginning of back-to-school prep. Chances are, you have a to-do list the size of a university reading list, including buying new school clothes (why do kids grow so much over the summer anyhow?), a new backpack and school supplies. While you’re getting everything for this coming school year in order, why not add one super-important thing to your list if you haven’t done it already? Open an RESP. You’ll be glad you did, because the sooner you get the RESP ball rolling, the more potential you have to save for their post-secondary education.
The cost of education is on the rise.
It’s exciting to think about what your child might become—a Michelin star chef, a doctor or even an astronaut (hello NASA). Wherever their education takes them, it comes with a price tag. According to Statistics Canada, university tuition fees have continued to increase, and depending on what program and school your child attends, the average rate of tuition starts at about $6,800 per year. Add housing costs and other mandatory school fees ranging from health services to sports, and you could be looking at thousands of dollars more to your yearly bill. With higher education becoming so critical for many new jobs, having a financial plan to tackle the rising price of post-secondary school is a smart start. One easy way to get ahead is by opening an RESP.
Watch your child—and your RESP—grow.
Just like seeing your little one graduate from crawling, to walking, and eventually driving away to new adventures, if you open an RESP when your child (or grandchild or niece or nephew…) is small, you can watch it grow over time. Starting early means you can maximize your yearly RESP contributions and how much money you get from government grants. It also lets you spread out those contributions over time, because let’s face it, between daycare and endless extracurricular activities, raising a child doesn’t come cheap!
You can begin contributing as soon as your child is born, and don’t worry if your child is a bit older, as RESPs will let you play catchup. But don’t delay, because there are limitations on how much you can make up on missed contributions. Also, once your child hits 16, there are conditions that apply for collecting grants. Bottom line: the earlier you can contribute the better!
Extra money and tax breaks? Yes please.
One of the biggest incentives for opening an RESP is extra money from the government—and who doesn’t like extra money? Currently, the Canadian government’s Canada Education Savings Grant program matches 20% of the first $2,500 you contribute (up to $500 assuming no carry-forward room) to your child’s RESP each year up to a lifetime maximum of $7,200. There is a lifetime maximum contribution limit of $50,000 per child.
None of your contributions are taxed when the money is withdrawn, but your child will need to be enrolled in a post-secondary program to receive the payments, called educational assistance payments (EAPs). Your child will then pay taxes on their EAPs, but it’s their tax rate that applies, not yours. Once you factor in their income (which will likely below when they’re using the money), personal tax exemptions from tuition, and educational credits, they’ll probably end up paying little or possibly no tax at all!
The CESG isn’t the only educational grant available to Canadians; there are other grants you may be eligible for, including the Canada Learning Bond (CLB), designed to help lower-income families jump right into saving, and other provincial savings incentives.
We know RESPs inside and out.
There’s a lot that goes into saving for an RESP—not to mention all of the hard work put in by your child—which is why choosing how to manage it matters. CST Spark has been helping Canadians with their RESPs for almost 60 years, so we know how important your investment is. This means working closely with customers to understand all of the rules, finding ways to maximize government grants and avoid tax penalties.
We wish we could simplify your life by doing your back-to-school shopping for you, but what we can do is make it easy for you to get an RESP and we’ll do all the work for you. And while there’s no magic ball to see how much your child’s post-secondary education will cost, it’s going to be more than today. So what are you waiting for? Now’s the time to get started on making their dreams a reality.
CST Bright PlanTM is only sold by Prospectus. CST Spark is the distributor and Investment Fund Manager of CST Bright Plan.
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