Saving for your Child's Education
Many parents wonder how much to save for their child's education. They also wonder how soon they should start. The answer is simple. Save Early, Earn More. Even small savings each year will translate into substantial savings later.
Examples of ways to save
- Rick and Diane have a three-year old daughter named Hayley. If they put $25 every two weeks into Hayley's RESP, that adds up to $650 a year. Their investment will also earn a $130 Canada Education Savings Grant (CESG).
- Over 15 years, Rick and Diane keep contributing at the same rate. They keep earning CESG money on top of their own savings. If all this money grows at 5% per year, then Hayley will have almost $19,000 to help pay for her education. Of course, the amount will be even higher if Hayley's grandparents or relatives also contribute, or if her parents increase their contributions.
Registered Education Savings Plan (RESP)
The RESP is a tax-sheltered education savings account that can help you, your family, or friends save for a child's education after high school. It is also registered by the Government of Canada.
Benefits of having a RESP
It allows savings for education after high school to grow tax-free and could also gain government money through the Canada Education Savings Grant and the Canada Learning Bond, if you qualify.
Canada Education Savings Program (CESP)
Once you open a RESP, you may apply for the Canada Education Savings Grant and the Canada Learning Bond.
The Canada Education Savings Grant (CESG) is money paid by the Government of Canada up to a maximum $7,200, to encourage families to save early for their children's post-secondary education.
The Canada Learning Bond (CLB) is money paid by the Government of Canada up to a maximum of $2,000, to help parents, friends, and family members save early for the post-secondary education of a child.
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