We all know that raising children can be very expensive. In 2015, MoneySense estimated the average cost of raising a child is approximately $13,366 a year, which adds up to $240,588 over 18 years. That’s a whole lot of money. Yet, with the rising cost of just about everything from diapers to tuition fees, there’s no good reason not to start planning ahead and be prepared for higher university costs in the future.
And Canadians are on to that. More Canadians are trying save up for college than ever before. Whether it has something to do with the increasing cost of tuition, or maybe it’s the stories we hear about students with large debts, parents are planning ahead to save for their child’s academic career.
With various savings options out there, we’ve seen more parents investing in a Registered Education Savings Plan (RESP) to save up for their children’s post-secondary education. What’s more, the amount of money they’re investing is also increasing. According to the 2016 Canada Education Savings Program (CESP) report, 51% (or 3.6 million) children had received the Canada Education Savings Grant since the incentive was introduced in 1998. In 2016 alone, Canadians contributed $4.43 billion into RESPs—a 3% increase from 2015.
RESPs are definitely one of the best investments parents can make for one very good reason: government grants. The federal government actually helps you save more money for college through the Canada Education Savings Grant (CESG). You can take advantage of money from the CESG using your RESPs, which will pay you 20% on annual contributions of up to $2,500. That’s a total of $500 per child per year in grant money to a life-time maximum of $7,200 over 17 years, the length of time you can collect the CESG.
Lower income families who qualify can also receive more money through the Canada Learning Bond (CLB). The CLB provides an additional grant of up to $2,000 per child for their RESP if they’re eligible for it. The money is free because no contributions are required to be made to an RESP to receive it.
Despite the huge benefits of RESPs, not enough families are opening RESPs and applying for this program. Employment and Social Development Canada (ESDC) statistics show that as early as 2008, only 16.6% of eligible families participated in the CLB. But there is some good news, the number of new families taking advantage of the program is steadily on the rise and the Government of Canada recorded that in 2016, 34.7% of eligible children benefited from the CLB.
When it comes to saving money, every little bit counts. If you’re not taking advantage of government incentives to help make your child’s post-secondary education more affordable, you are missing the boat.