Wednesday, October 14, 2015

The Earlier You Invest in Your Child’s RESP, The Better Off They’ll Be!

The Kids Growing Up 2011Taking their first steps, learning to talk and riding their bike without training wheels are just a few of the milestones we remember our children achieving. At the time, it seems like they’ll be young forever until they ask us to move them into their university dorm and we wonder, “where does the time go?”

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.

Stock-Heritage Education Funds-Money-600

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.

Registered Education Savings Plan Heritage2

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?

Connect with Heritage Education Fund Website | Facebook | Twitter
* 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

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40 thoughts on “The Earlier You Invest in Your Child’s RESP, The Better Off They’ll Be!

  1. Clare

    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

    Reply
  2. Louise

    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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    1. Sarah Post author

      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.
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  3. heidi c.

    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.

    Reply
  4. michelle matta

    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.

    Reply
  5. Krista M

    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!

    Reply
  6. Cheryl

    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!! 🙂

    Reply
  7. Julie

    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.

    Reply
  8. Theresaq

    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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