
Recently I posted about how you can save for your child’s education and many of you commented that you hadn’t started to save for your child’s education (but wanted to) and that you were probably too late. Good news is that the earlier you invest in your child’s RESP, the better off they’ll be and here are a few reasons why.
Your money will grow. No matter the contribution amount, the money will continue to grow. The bonus of having money in an RESP is that it’s tax-sheltered until the plan matures. When it comes time for your child to withdraw the money, they will be taxed at a student rate (students typically pay little to no tax). This amount will likely be very low given they can claim a personal tax credits return* and they probably won’t have a large salary.
The Government may grant you money. There are quite a few calculations required to determine eligibility and amount, such as province and household salary, but the Canada Education Savings Grant (CESG) equals 20% of the first $2,500 of your annual contributions. If your child is eligible for the CESG, you will receive a maximum of $500 to $600 annually until your child reaches the age of 17, to a lifetime amount of $7,200.
Be sure to contact a Heritage Education Fund Representative to discuss additional grant contributions that may be available to your child, especially if you are located in Quebec, Saskatchewan or British Columbia.
With these two points in mind, I wanted to give you an idea of how an RESP can help your child.
We took our recently unexpected Universal Child Care Benefit (UCCB), a lump sum payment of $760,** and put it into the kids’ RESP. Since we were eligible for the CESG, the government granted us $152 so it immediately grew to $912. If we do nothing else besides put the money in an account and let it grow at an annual rate of 3%, by 2027 the money would grow to $1,300.29,*** which translates to a growth of 42%!
Based on your risk tolerance and the different plans offered by Heritage Education Funds, you may be able to realize even more than that. Regardless of how much you invest, the key is to start investing as soon as you can, keep investing regularly, and then watch your money grow.
Don’t forget to enter their Annual RESP Draw where you have a chance to Win 1 of 8 contributions of $2,500 towards a Heritage Education Funds RESP plan. Draw date is December 31, 2015.
How Old Were Your Kids When You Started to Invest?
* In 2015, the Ontario Personal Tax Credits Return is $9,863.
** We have two children aged 5 years old.
*** I used the Bank of Canada Future Value of Current Investment Calculator to generate this value.
Disclosure: As a Heritage Education Funds Ambassador, Journeys of The Zoo received compensation in exchange for sharing our story.
The picture of The Kids was taken in April 2011 when they were less than 18 months old.
Photo of money courtesy of Scarletina
We started an RESP for Molly quite early on. I put the child tax benefit into it every month and more when I can. The kid is going places I tell ya.
Mommy Outside recently posted…Playtime Anytime With Playskool Play-Stow-Go
Dear Molly,
The skies the limit for Molly!
Besos Sarah.
Sarah recently posted…Tips on How to Earn Extra Money Selling Unwanted Items
A growth of 42% is amazing. Thank you for the advice about starting early! It is so important to invest in your children’s future.
Christy Maurer recently posted…The House at Homecoming Cove $50 Giveaway WW Ends 11/6
Dear Christy,
Even if it’s a small sum, the earlier you invest, the bigger it can grow!
Besos Sarah.
Sarah recently posted…Year-round Activities for Your Family at @ScenicCaves Nature Adventures! #BlueMountain
We just started so 6 months, 2,6, and 7 but something is better than nothing. 42 % is an enticing number and that is a great push for those who are on the fence whether they should get an RESP going
Aneta recently posted…My Little Pony Equestria Girls: Friendship Games + Giveaway
Dear Aneta,
42% growth is amazing especially considering my initial deposit was $0!
Besos Sarah.
Sarah recently posted…Proof That I’m Smarter Than My Dog
I am so glad we had contributed to Heritage scholarships. It was one less thing to think about when my son went off to College last year. Peace and Love xoxo
Dear Clare,
What a great gift you have given your son.
Besos Sarah.
Sarah recently posted…Start this New Halloween Tradition and Support Charity at the Same Time! @BostonPizzaFdn #BPKidsCard
We started early with the first one, and totally slacked with the second… but we’re catching up. 😀
Jessica recently posted…THE END.
Dear Jessica,
Good on you for getting started. Better late than never.
Besos Sarah.
Sarah recently posted…Save Money with Yak Home Phone Service and WIN! CAN, 11/13 #giveaway
What a great program. College is getting so expensive. Wish we had something like this in the U.S!
Dear Lexie,
We are really fortunate in Canada. Thanks for stopping by and reading.
Besos Sarah.
Sarah recently posted…You Know You Live in Canada When…
We’ve had RRSPs for both kids since they were born. With government top ups it’s one of the best investment returns I think you can get (on top of the fact that saving for your kids education is obviously important).
My parents did it for my brother and I growing up too. I graduated debt free from university. It was one of the best gifts my parents ever gave me.
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Dear Louise,
I graduated debt free from university too and I so appreciate the sacrifices my parents made. Especially because they didn’t have any of these programs around way back when. It’s pretty crazy that a $0 investment can translate into $1,300+ (likely) tax-free money!
Besos Sarah.
Sarah recently posted…You Know You Live in Canada When…
With four kids to plan for, the more that I can the save, the better off we will be when the time for higher education comes.
Dear Heidi,
Every little bit counts especially with all the grants that are offered.
Besos Sarah.
Sarah recently posted…Proof That I’m Smarter Than My Dog
I suppose in my case, being older and hoping to eventually have a child through surrogacy or adoption, the benefit is the money I could/would/should be investing in an RESP earlier on I am simply working on saving until my dream comes and my child is in my arms. At that time, I can transfer any savings I have made into an RESP for them. I will have had years to take such great advice from younger moms.
Dear Michelle,
I hope that all your dreams of a family come true.
As for the advice, the best advice I ever got was to not listen to the advice 😉
Besos Sarah.
Sarah recently posted…Start this New Halloween Tradition and Support Charity at the Same Time! @BostonPizzaFdn #BPKidsCard
So important to have a savings plan.
Dear Diana,
As someone that was fortunate to have my university paid for by my parents and grandparents, I personally believe that it is so important to try and help our kids with their education as best we can.
Besos Sarah.
Sarah recently posted…Save Money with Yak Home Phone Service and WIN! CAN, 11/13 #giveaway
Even if you don’t have a lot to contribute, it’s true that the money continues to grow. Something is better than nothing & that little bit adds up. Just take whatever you can & invest in your children’s future. You won’t regret it!
Dear Krista,
Your kids will appreciate every.single.dollar that you can save for them.
Besos Sarah
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I am proud of the amount we have growing for our little ones. It is surprising how fast it creeps up with a little bit each mth!! 🙂
Dear Cheryl,
It really does add up when you factor in the government contributions and the market increase!
Besos Sarah.
Sarah recently posted…Win 1 of 2 Beauty Prize Packs from @HealthSnap! CAN, 12/15 #canwin #giveaway
Thank you for the wealth of information on getting our children’s education funds started.This is so important for their future.
Dear Wanda,
I really thought that I knew it all but then I learned about the “Canada Learning Bond”. Turns out we are eligible and hadn’t applied. I fixed that really fast!
Besos Sarah.
Sarah recently posted…What Would You Name Her? #Travel
Nice to see the government stepping in and helping all of our children with post secondary schooling
Dear Julie,
In the long run, it makes great business sense because those kids will grow up to pay (more) taxes.
Besos Sarah.
Sarah recently posted…What Would You Do If This Happened to Your Kids Teeth?
I’m not sure of the name but I know there is also there is something similar to this for children with disabilities. Except I have never met anyone who has opened an account. My son is now 16 and has disabilities.
Dear Julie,
I found this information from CRAs website about the “Registered Disability Savings Plan (RDSP)” http://www.cra-arc.gc.ca/rdsp/
Hope it helps.
Besos Sarah.
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Thanks for the great advise! Going to start soon.
That is a great program, we are so fortunate in Canada!
I would love to get the Live Clean Fresh Face Foaming Daily Cleanser!
It’s a great idea and it feels really good to start an RESP for your kids. It’s never too late to start!
Such a shame more people do not add to this 🙁
Love that our government sees the importance of a savings plan for our kids education 🙂
Our child was older 12 or 13 but it really helped
This is a great program, I love that the government is contributing. Secondary education is extremely costly.
I started back in 1997 when my first one was in diapers – and I did take ( I think )2 or 3 years off of not contributing at all in the middle due to being self employed I started with $25 and worked my way up to $100 per month for both kids.
When the first One Graduated: We gave him $10,000 in Fall 2014: Cost of Going to College away from Home Including Tution/Residence/Books/Spending allowance for 1 year: $20,000
The Second One is now graduating: We have $21,000 left in our RESP and will be paying her first year of college via the RESP of what is left. She is also leaving home and it’ll cost close to the same: $20,000 per year.
So If I were to give advice: Do a minimum of $100 per month per child if possible as I imagine the costs will double again in 20 years ( ish)
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Dear Theresaq,
$20,000 a year, wow! I had no idea.
How fortunate for your kids that you did save and that you started so early. Every little bit counts.
Besos Sarah.
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