We know parents do so much for their children, from waking up at 5am to dropping them off to school, to finding creative ways to hide green vegetables in food, to taking them for yet another back-breaking “helicopter ride.” Fortunately, one of the best things that a parent can do for their child is opening up and contributing to a Registered Education Savings Plan (RESP).
But too often, parents get busy with managing the house, school activities and work that they don't realize that saving for their children’s education isn’t hard. At CST Spark, we know life gets busy and that's why we made education savings simple.
Whether you have a little or a lot to invest in your future nurse, city planner or scientist, the earlier you start saving, the better. Here’s why:
Government grants make an RESP a savings tool like none other.
If someone was giving out envelopes with $500 cash inside to put toward your child’s education, would you walk past them? We didn’t think so. While there are many RESP benefits, the biggest one is the Canada Education Savings Grant (CESG). With the CESG, the government matches 20% of your RESP contributions, up to a maximum of $2,500 a year (just over $200 a month), to get up to $500 in grants each year. If you contribute $100 a month for a year, you’ll get $20/month in grants that year. That’s how the federal government says thanks for investing in your child’s dreams and helping them to one day contribute to society, doing what they love.
Those grants add up. Your child is eligible for a lifetime maximum of $7,200 in CESG to cover rent, a laptop, late-night study snacks, you name it!
There are other grants, too. When the child lives in a household that falls below certain income thresholds, they could qualify for up to an additional $2,000 through the Canada Learning Bond (CLB). And depending on where you live, you could qualify for provincial grants such as the Quebec Education Savings Incentive (QESI) and the British Columbia Training & Education Savings Grant (BCTESG). At CST Spark, we make it our mission to ensure that we help our customers apply for all the grants they’re eligible for.
The costs of post-secondary education are going up. So be sure to keep up.
The costs of tuition continue to rise. It could cost you $172,000 to send your child to a university away from home by the year 2038*. While student loans are an option to help students pay for education, they often don’t cover the full amount—students still have to work part-time to pay for their living costs—and the financial stress can affect grades. And of course, loans need to be paid back, plus interest. The stress of major loan payments makes life harder for young people as they try to launch their careers and maybe even start families.
So while your child might love that sparkly unicorn bag or new pair of Nikes now, what they really need from you to set them up for a happy, fulfilled life is to save for their future. And you can do that by starting an RESP, a smart savings tool that can help you keep up with rising education costs.
*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 for 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.
Tapping in to those grants early on can really pay off.
The thing with RESP grants is, they’re only available up until the end of the year your child turns 17. And the CESG only matches contributions up to a maximum of $500 in grant per year (or $1,000 in grant per year, if you have enough carry-forward contribution room due to not contributing the max amount in past years). If you qualify for the Canada Learning Bond, you get $500 for opening an RESP and $100 for each additional year you qualify until your child turns 15. In other words, start investing early to maximize all the grants that are available you to you. We wouldn’t want you to walk away from government grant money!
If you already have an RESP, we recommend you find out if you have any contribution room left over from previous years and try your best to catch up. Getting this information is easy if you’re with CST Spark. We are here for you to help ensure you’ve maximized your contributions, and that you’ve applied for all the grants for which you are eligible.
Every RESP comes with a built-in tax break.
One reason an RESP has an edge over many other savings plans is because any income earned is sheltered from tax while in the plan. That means that your money grows in the RESP tax-free. And since the income is only taxable at the time of withdrawal, and students tend to have little or no taxable income, it's possible that your student will not have to pay any tax.
Grants are grand. But your RESP can grow in other ways, too.
Fun fact: You can make investment income on both the money you invest directly, as well as on the money the government of Canada invests in the form of grants. Pretty great, right? The earlier you start investing, the earlier your investment starts to grow. And over time, your earnings can generate earnings as well. That’s the magic of compounding. By our calculation, if you invest $2,500 a year, it could land you $34,400 in investment earnings alone by the time your child is 18.
At CST Spark, our No. 1 job is to help you maximize your RESP benefits.
We rebalance your investment as your child ages with the goal of maximizing growth early on and preserving your gains closer to graduation. This means we rebalance your investments based on your child’s age for you. The reason we do it is simple: so, the money is there when you need it to help pay for your child’s post-secondary school. We also diversify your investments in Canadian Fixed Income, Canadian Equities, US Equities, International Equities and Global Real Estate, investing in exchange-traded funds (ETFs) to keep our management fee low. Plus, we make sure you apply for all the government grants you qualify for.
With a CST Spark RESP, you call the shots.
We’re proud to offer a smart, simple and flexible RESP, making it accessible for all Canadians to save for their kids’ futures. If you already have an RESP with us, we want to take this opportunity to say thanks for believing in your child’s potential and being with CST Spark! If you haven’t yet kicked off your education savings, there’s no better time than the present. Want to start investing with just $10 a month? That works for us. Want to open an RESP from your bathtub? We’re OK with that too!
And once your RESP is up and running, you can make any changes to your plan online on our secure website. If you ever need help, or have a question about your RESP, our representatives are just a phone call or chat away—ready to help you make your little one’s dreams come true.
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