Saving and the Future of Your Children
Growing up, I was fortunate to come from a country where education at that time was not costly; if you were un-employed your education was free. Completing high school and attending college was never considered a luxury, it was necessary to get ahead in life.
The rising cost of living in Canada is growing much faster than many families can cope with; making it one of the most expensive countries to live in. Saving and planning for the future has never been more important and starting an RESP, to help pay for our children’s costly university fees, is high on that list. Families all across the country should be thinking about their child’s future education and what they can do right now to help make it easier.
What is an RESP?
An RESP is an investment used by parents to save for their children’s post-secondary education in Canada. The principal advantages of RESPs are the access to the Canada Education Savings Grant (CESG) and a source of tax-deferred income. In some provinces, if the child is under the age of 17 when contributing, the province may help contribute as well.
How much do I need to put into an RESP?
In order to get the maximum annual RESP grant of $500, you need to contribute $2,500 per year or $208.33 per month to the RESP account. The reality is that many people might not be able to spare this much from their budget, but then take a good hard look and weigh up your options.
Could you cut back and make up that $208.33? Let’s see.
A bottle of wine a week $15 extra, cable TV over basic = $20 Daily, and Coffee=$10 per week – total: $45 multiplied x4 = $180 per month.
“Just saying” (:
Susan Goodman, a leading RESP consultant for Global financial, says many of her clients don’t understand the importance of an RESP; often finding it out of their reach. With a little help and a budget, Sue says an RESP is definitely a goal that families can realize.
How can I get my kids to understand the value of an RESP?
As parents, you want to help your kids get the best possible start. However, as a parent, you can also teach your children an important lesson by putting some of the responsibility on them. Encouraging a child to work part-time through school, teaches them the value of the money and the importance of hard work.
Teach your children the value of money early on.
Teach them to spend and choose wisely from as early as the four to five years old. For example, Dish out an allowance then offer to match their savings. “If you save $2 in the savings jar, I will give you an extra $2.” It’s an incentive and over time will they will come to understand and appreciate. When your child goes to the store to spend the other half of their allowance, point out what may be worth buying and may not be a good buy. Ultimately they have the final say but teaching this early is a life tool that will be used a lot as they grow.