More than ever, the job market requires advanced degrees and specialized skills that can only come from higher learning. At the same time, the cost of education is continually rising and there’s uncertainty about what it may cost students in 15 or 20 years. It’s estimated three out of four new jobs require post-secondary education in the form of a university degree, college diploma, trades school or apprenticeship programs. According to Statistics Canada, the cost of undergraduate programs in 2017 was 3.1% higher than 2016 alone. If we take a look at the cost of post-secondary education in the last decade, the increase reported has been over 40% on average, this is scary for most of us!
What is certain is that planning and preparing early for a post-secondary education is more vital than ever. We can do that by setting up an RESP as early as we can.
- RESPs do more than cover the costs of tuition. They can be used for other expenses related to education, such as housing, food, books, technology needs and travel – items especially important for students attending school away from home.
- The federal government offers the Basic Canada Education Savings Grant (CESG) – a grant of 20% on the first $2,500 contributed to an RESP each year for a total of $500 (lifetime limit of $7,200.), a nice top-up. You could also qualify for additional CESG assistance – up to an extra 20% on top of the basic grant.
- With RESPs, there is no annual maximum contribution amount, although there is a $50,000 lifetime maximum of allowable contributions. You can carry over some unused CESG-eligible contribution room to catch up later if you want to (although there are some restrictions on how much can be caught up in a single year).
- RESPs offer a lot of flexibility for your money if the beneficiary decides not to pursue post-secondary education. You can hold the plan open for 35 years in case the beneficiary’s plans change; roll the growth over to a registered retirement savings plan (RRSP) if you have contribution room; designate another beneficiary; or withdraw the contributed money.
The years go by all too quickly and before you know it your child is a teenager. Start saving for their education today and benefit from the power of compound growth. The sooner you start to invest the longer your money has time to grow.
Venus Aguilera is a Financial Security Advisor with six years of experience in the industry and with a passion for setting up families for financial success. For free financial advice and consultation Call 587-893-5275 or email her at firstname.lastname@example.org