Many Canadians are welcoming the one-month deadline extension for filing taxes with open arms. But for those of you expecting a tax refund, you’ve probably already finished doing your taxes to get the money sooner. And given what the last couple of months have felt like for all of us, you’re probably tempted to use the extra money on a vacation. But, on second thought, you realize now isn’t the best time to travel.
Whether you were expecting a refund or it came as a wonderful surprise, the question remains: Where should you park that money? If it’s money you don’t need right now, why not invest it? Otherwise it will be too tempting to think of ways to spend it (and as we all know it’s not hard to think of ways to spend money).
Here are three good reasons to invest your tax refund in an RESP:
1. Education is always a good investment.
There may be a lot of uncertainty these days, but we can say this for sure: post-secondary education, whether university, college, or trade school, gives young people the confidence and skills they need to find purpose and chase their dreams. It’s an investment that continually pays dividends for decades—in the form of a fulfilling career. (There’s a bonus for parents too: a good-paying job made possible by education means they won’t be living in your basement in their thirties!)
2. An RESP grows with government grants.
When you contribute into your RESP, the federal government rewards you by adding a 20% top-up. That means, if you contribute $2,500 to your RESP, the government will add $500 that your child can use for education costs—such as tuition, rent, and a meal plan. If you contribute $5,000 for two children, you’ll get a whopping $1,000 in government money!
Remember, with RESPs, the government provides matching grants up to a cap—of $500 per child, per year to a lifetime maximum of $7,200 per child. But if you’ve already opened a plan, and didn’t contribute the full $2,500 per child in previous years, you can “catch up” on grant money by making additional contributions this year.
3. Earn tax-free investment income in an RESP.
With an RESP, remember that you’re not just earning income on your own contributions; you’re earning income on the 20% matching grant from the government, too. The best part is that income grows (hello wonderful compounding effect! Tax-free while it’s in the plan, and when the beneficiary withdraws the money for school, in most cases, they’ll pay little or no taxes on it.
If you haven’t already, now’s a great time to start an RESP.
Working from home? Have extra time in your hands? Now’s a great time to join the majority of Canadians in opening an RESP. Investing in your child’s education just makes sense. While you may regret that time you impulse bought that kitchen gadget you’ve used all of two times , you’ll never regret investing in a child’s dreams.
Why choose CST Spark?
We do one thing, and that’s RESPs. Unlike some banks, we automatically adjust our investments according to the child’s age. We aim for high growth in the early years and then we work to lock in those gains with more secure investments as the beneficiary gets closer to needing the money.
Plus, we know all the rules about RESPs. Want to know how much of your tax refund you should invest in your RESP to get the maximum grant? We can help with that. Still confused about how RESPs work? We’ve got the answers, and the time to walk you through your options. Just give us a call or message us over our online chat.
You’ll also be glad to know that we’re a digital-first company. So you can open your RESP from the comfort and safety of home. The process is simple and easy to understand, and we’ll help you make sure apply for all the provincial and federal grants you’re eligible for, which will help your RESP grow. Kind of like that kiddo in your life.
Ready to get started on your child’s education saving and invest that tax refund into something truly important? Reach out today.
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