RESP Know How
As loathsome as it is to admit, there are a few things that my parents did right. One of them was fostering a love of travel, and the other was paying for my University. I wasn’t saddled with student loans after graduating, which made saving for a downpayment an easier endeavour.
Unlike my folks, I can’t expect to suddenly be flush with cash when Eve heads off to Uni in (gulp) ten years time. But to be fair, my tuition only cost $1,800 back in the day, but it now runs anywhere from $5,000 to$12,000, depending on your faculty and province. Who knows how much it’ll be in a decade? Plus, there’s all the housing costs, books, obligatory beer fund, etc..
Since I feel obliged to give Eve the best of what I had, we started saving for her postsecondary education as soon as we moved back from England when she was three. We had a few years to catch up on, so we set up a Registered Education Savings Plan (RESP). We’ve only been at it five years and Eve’s account is already sitting pretty.
How, you might ask, is this possible for a freelance writer and her husband (who does not work in oil and gas) manage this? Well, we started early and contribute regularly. Our secret is a little something called RESP-matic. I don’t even see the $208 that goes out of our account and into Eve’s each month, as we set it up with the bank to come out automatically. We set aside that amount as it’s the maximum you can put away to receive free money from the government.
That’s right. The Canada Education Savings Grant will match up to 20% on the first $2,500 contributed annually ($208/month per kid). It works out to $500 a year, and a lifetime maximum of $7,200. Not maxing out the $2,500 a year, just leaves money (government money!) on the table.
Don’t worry about being locked in. You’ve got the flexibility to use the RESP for university, college, apprenticeship and non-credit courses. In the horrifying event that Eve doesn’t continue studying after high school, we can use these contributions (and earnings) to fund my much neglected RRSP.
Want to see how easy it is? Check out this cool chart that shows you how much you’ll save depending on your child’s age. And if you’re looking for more tips on how to save money with kids, you might enjoy this article I wrote on the 10 worst financial mistakes parents make.
For us, $208 a month isn’t noticeable. Some people ask relatives to donate to their child’s RESP account in lieu of birthday presents, and others can only manage a weekly contribution of $25. And that’s just fine. Every little bit counts! Our only goal is to have Eve graduate debt-free, and I know this is possible through the RESP program.
Have you started saving for your child’s education? What are your tips?
Disclosure: I am part of the RBC RESP blogger program with Mom Central Canada and receive special perks as part of my affiliation with this group. The opinions on this blog are my own.