August 22, 2013
All parents want to offer their child a good education and the opportunity to fulfil their dreams. Investing in a registered education savings plan (RESP) is an ideal way to save for a post-secondary education. To maximize RESP savings, it’s best to open an RESP as soon as your child is born, but this may not be the easiest time to shop around for a financial product. So why not do so while you’re pregnant?
An important decision should be made when one is well-informed and rested
Between changing diapers and adjusting to sleepless nights, not all new parents may feel up to learning about a financial product. A simple solution is to take the initiative of shopping around in the last couple of months before you give birth. Most RESP foundations will be happy to send a scholarship plan representative to your home–at your convenience–who will go over the various products and advise you in selecting a plan suited to your needs.
Financial planning is always easier when one is well-rested and has time to read about the different products available on the market to make a well-informed decision.
Peace of mind... so you can focus on what really matters
Once you have chosen a product and subscribed to your plan, the rest takes care of itself. Your plan will take effect as soon as your child is born, and only at that time will your RESP contributions begin. You can then focus all your attention on baby cooing and showering your little angel with love, while knowing that his future is well-planned for.
The only information you will be required to provide is you and your baby’s social insurance numbers (SINs) in the twelve months following your plan’s effective date. This information is necessary for your plan to be registered with the Canada Revenue Agency and for your child’s eligibility to the generous government grants, such as the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). Several provincial governments also offer a grant; in Quebec, the government provides the Quebec Education Savings Incentive (QESI). These grants could increase your savings by 30% to 60%, an amount totalling up to $12,800 per child!*
Make it a fun thing!
Learning about RESPs doesn’t have to be a stressful or strenuous task. An easy and entertaining way to incorporate a little financial planning to your pregnancy is to have a scholarship plan representative attend your baby shower to make a short presentation or give a fun quiz. Your friends may have smart questions you hadn’t thought of or personal experiences to share. In addition, having a representative attend your shower is a great way to introduce RESPs to your family and friends as a potential gift idea for your baby in the future. Universitas Trust Funds even offers gift certificates applicable to new or existing RESPs.
Plan ahead, invest early... and earn more!
Whether you’re an expectant, a new or an already seasoned parent, there’s never a wrong time to plan for your child’s future.
However, by opening and contributing to an education savings plan during your child's early years, from birth if possible, you will enjoy the full benefits of the RESP, particularly higher investment income. If you open a group RESP during your child’s first year (0-12 months), your savings and the government grants will grow tax-free over a 17-year period!
The following chart illustrates this reality:
1. This amount includes:
- your savings;
- Government grants: Basic CESG of 20% and Basic QESI of 10%; and
- Returns of the REFLEX plan offered by Universitas Trust Funds: the accumulated income projection for the government grants is based on an estimated net return rate of 5.5%, whereas that of the savings is 5%.
*The Canada Education Savings Grant (CESG) rate is 20% to 40% based on net family income. CESG annual limit is set at $600; lifetime limit is set at $7,200 per beneficiary.The Quebec Education Savings Incentive (QESI) rate is 10% to 20% based on net family income. QESI annual limit is set at $300; lifetime limit is set at $3,600 per beneficiary. The Canada Learning Bond (CLB) can reach up to $2,000 for a child born after December 31, 2003 and whose family receives the National Child Benefit Supplement.Certain conditions apply.
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