August 29, 2018
In a few months, our family will welcome a new member, and I’m already thinking of opening a registered education savings plan (RESP). You might think it’s strange to think of this before baby’s even born, and yet…
Little strokes fell great oaks
You’ve probably heard of the fable about the ant and the grasshopper? Well, I see myself as an ant: I’m not cheap, but I want to be wise and prepare for the future.
I’d say I have an average income, but even so, I do my best to save a little every paycheck. And you’ve heard it before: “out of sight, out of mind,” so once it’s invested, my money is no longer in my bank account and I’m not tempted to spend it!
An investment that pays off
I’m part of the lucky people who know that the RESP is the best investment vehicle to plan for your child’s education. First off, there’s the grant money: each year, the government will top up your contributions by at least 30% of the first $2,500 paid into all plans opened for a beneficiary1, and that 30% is available to everyone. So why leave it on the table?
On the other hand: no RESP, no grant money.
Invest early: slowly but surely earns big
I’m also aware that by investing early, my money grows over a longer period… and this speaks to the ant in me!
In my case, rather than investing it all at once, the best strategy is to start with smaller amounts so I don’t put too much financial pressure on myself. Later on, when I have more means, I’ll be able to increase my contributions.
Naturally, the returns are more interesting the earlier you start contributing to a plan since your RESP investment grows tax-free over a longer period of time; and that includes both your savings and the grant money—so it’s twice as interesting!
Finally, to make sure I meet my investment goals, I think I’ll choose the monthly contribution option. This way, my contributions will be taken straight from my bank account and my investment will grow without me having to think about it!
After all, my ant side still enjoys some peace of mind!
1. The Canada Education Savings Grant (CESG) rate is 20% to 40% and the Quebec Education Savings Incentive (QESI) rate is 10% to 20% based on adjusted family net income. The annual limits are set at $600 for the CESG and $300 for the QESI, while the lifetime limits per beneficiary are set at $7,200 for the CESG and $3,600 for the QESI. CLB: The Canada Learning Bond is up to $2,000 per beneficiary and is offered for children born after December 31, 2003, and whose families meet the financial criteria. Certain conditions apply. Refer to our prospectus.