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