Family Life

Saving for Your Child’s Education with RESPs Doesn’t Have to be Stressful

I was one of those kids who graduated from high school able to pick any school and not have to worry about how much it would cost, or where the money would come from. My grandfather was a strong believer in education and wanted to make sure that my brother and I could go to school. He knew that my mom wouldn’t have been able to save the money for both of us on her own. So he set up trust funds for our education. I know now that I was very very lucky, and so thankful for him.

Fast forward 7 years and I found out I was expecting my first baby and was going to be a parent. I started stressing about my kids’ education. Remembering how much it cost for me to go to school 20 years ago, sure I didn’t have to pay out of my own pocket, but I still knew exactly what it cost when I made my tuition payments. I couldn’t imagine what the current cost was, let alone in 20 years when my tiny fetus would be ready to leap into the world of post secondary education. Thankfully my family has a background in finances, my Mom was a financial planner and my Dad worked at the bank in loans & mortgages. So you could say I had a pretty good understanding of the world of investments. I started my own RRSP when I was 18 years old, and I withdrew against it under the Home Buyers Plan when I bought my first home. But all of this experience didn’t help relieve the stress, university costs a lot of money!

With my mom to the rescue, we sat down and started discussing a plan. I learned that it really isn’t that overwhelming, especially when you have the right person to educate you. Honestly how many times have you been to a baby show only to have someone jump in your face and pressure you into signing your kids up for one of their savings programs. That is not the way to do it. You want to sit down with someone you trust who will take the time to learn about you and your goals, and set you up with what is best.

We set up a family RESP plan which allowed us to contribute for both kids together. We would do regular contributions that automatically withdrew from my bank account, one less thing for my sleep deprived mommy brain to remember! RBC has their RBC RESP-Matic program to make this easy for you.  One of the main advantages of a family RESP is that the funds in the plan do not have to be shared equally among the your children, giving you more flexibility when it comes to making withdrawals. I knew this was a great plan as my brother and I both had the same sized education trust funds, but I attended a college and had money left over while my brother went to university and had debt at the end.

She taught me that the government gives you free money. Yes, you read that right! The Canada Education Savings Grant will match up to 20% of the first $2,500 contributed annually. That could mean as much as an additional $500 a year, up to a lifetime maximum of $7,200!

It is so nice receiving the yearly statements showing how their RESP is growing, and the government contributions. I am thankful that my mom was there to help me.  Sure there is still some stress, as I worry about having enough for them, but that is where sitting down regularly with your financial planner can help.

There are some really amazing facts that always helped me understand better so I wanted to share with you.

  • Invest $25 a week from the moment that your child is born, by the time they are 18 years old you will have over $50,000?!
  • Get up to $500 a year in government grants for a total of up to $7,200 (the government will match 20% of the first $2,500 contributed each year for eligible children).
  • You can get the right advice by sitting down with a financial advisor (like an RBC® advisor) who will take the time to understand your goals and recommend the best investment strategy.
  • You can invest in funds, savings deposits or Guaranteed Investment Certificates (GICs).
  • Tax-deferred growth – income earned on investments is not taxed as long as the funds remain in the plan.
  • The flexibility to choose either an individual or family RESP.

Sadly my Mom is now retired and she is no longer my trusty financial planner, so knowing that there are banks like RBC out there to help make this easy for busy parents helps. Why not visit the RBC RESP site for more information on the above facts – I know that sometimes seeing is believing.

Have you started saving for your kids education? Do you have a financial planner?