You clicked on this article, so you already know how important it is to save for your children’s future. You want them to follow their dreams, and you definitely don’t want them to graduate from college or university saddled with debt. Maybe you’re thinking, “I’ll save up for their education after the car is paid off,” or “as soon as I have a thousand to spare.” But the reality is, it could cost a whopping $172,000 to send your child to university by the time 2038#rolls around. So the sooner you start saving, the better.
Here’s the good news about how to save for your children: it’s easier than most people realize. With these tips, you’ll be ready for the day your kid comes home holding university brochures. You’ll be so glad you made education savings a priority way back.
Tip #1: Make online classifieds your friend
Kids grow so fast, sometimes you don’t even have the chance to take the tag off something before it doesn’t fit anymore—like that adorable pair of rain boots you bought so lovingly just two months ago and they are already too small. So, if you have new (or barely used) clothes and gear kicking around, why not post them online to try to recoup some of your costs? By selling gently used items online, you can make hundreds a year, and a great place to put any unexpected windfall toward education savings. To make sure the goods go for the price you want, try to post them when they’ll be in demand—post-winter boots in October or November and rain jackets in the spring. Oh, and don’t forget to follow safety measures when selling to strangers. Here are helpful tips for staying safe.
Tip #2: Start an RESP ASAP
When it comes to education savings, your timeline isn’t as long as you think. If you’ve already watched your child go from an adorable newborn to a wise-cracking toddler, you get that the time goes by fast. That’s why we suggest you open a Registered Education Savings Plan (RESP) as soon as you can. By starting early, your money will have more time to grow.
The other reason to start early is to maximize the amount you receive in government grants. If you contribute to an RESP, the government matches 20% of your contributions to a maximum of $500 per year up to $7,200 per child over the life of an RESP!
To maximize collecting this grant, the rule of thumb is to contribute $2,500 a year starting at age 3 or earlier. But if you start later, say at age nine, you might still get all the matching grants—you’ll just have to double up your contributions some of those years.
Tip #3: Look for little ways to save
Many people make the mistake of thinking they need to wait until they have hundreds saved before they open an RESP. But with CST Spark, you can open an RESP with as little as $10/month! In fact, the idea of starting to save with small amounts and setting a short-term goal can be easier to handle and more attainable—not to mention habit-forming—than promising yourself you’ll put aside large chunks of money regularly for the next 17 years (gulp!).
And small amounts can really add up. For example, you could stop buying your coffee in a café and instead brew it at home. If you put the $4.50 per day you might spend on coffee into a CST Spark RESP, that could add up to as much as $43,000* (including government grants and interest) by the time your child graduates from high school.
At CST Spark, we make it easy to invest as often as you’re able. We’re a digital-first company, so you can simply log in to your RESP and make contributions from the comfort of your home or anywhere on the go! (Virtual high five!)
If you don’t want to set up automatic monthly contributions, you can try other tricks to save bit by bit. For instance, you could put any change in your pockets at the end of the day into a piggy bank—and then contribute it to an RESP every few months.
Tip #4: Use special occasions to beef up your child’s RESP
These days, most kids don’t have a shortage of toys. Many parents, having stepped on countless action figures or lego blocks in the middle of the night, are painfully aware of this fact. Instead of getting clothes that don’t quite fit or a toy that will be abandoned after a few weeks, ask friends and family to contribute a small amount to your child’s RESP the next time a major gift-giving holiday or birthday rolls around. Or, if your kid gets cash as a gift, you can deposit all or part of it in their RESP. The gift-giver will feel good that their gift is helping with such an important goal, you won’t have to do as many toy purges, and your kid will get to know there’s a whole village of supporters helping out with that dream. Win win-win!
Tip #5: Set up an auto-contribution
Here’s a tried-and-true financial rule of thumb: if you don’t see the money, you won’t spend it. You can set up contributions to automatically transfer your money from your bank account each month (or at an interval of your choice). Because auto-contributions can be a small amount of money each time, many people who set up auto-contributions for education savings don’t even notice the difference to their budget.
If you set up a monthly auto-contribution for exactly $208.33 into your RESP, by the end of the year, you’ll have—you guessed it—made your $2,500 contribution. That will qualify you for the full $500 in government-matching grants. If that’s too steep, you could contribute $104 a month and get a healthy $250 annual boost from the government.
So what are you waiting for? Saving doesn’t have to be hard
Thanks to CST Spark’s digital-first approach, you can open your RESP in just minutes, set up auto-contributions, and qualify for hundreds of dollars in government grants all through our website—without even having to leave your home. See, we told you saving for your children’s education is easier than you think.
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# Projected tuition costs of a 4-year university program are based on the annual average cost of tuition and compulsory fees across Canada for the previous school year and an assumed average annual increase of 1.7% based on the previous 5 year's average. Room and board are based on typical costs of residence with an average annual increase of 3.0%. Projection includes the cost of entertainment, transportation and books adjusted using an annual inflation rate of 2%. Source: Statistics Canada 2019 and university websites.
* Projection based on $135/month for 18.5 years, basic grant and net rates of return of 1.3% to 4.3%, depending on the age of the child.
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