For many Canadians, education savings makes up a large portion of concern. The cost of sending your child to earn a post secondary diploma or degree is increasing in leaps and bounds. The sooner you start saving for it, the more the government grants and your money can assist you.
How do I Save for Education?
Registered Education Savings Plans (RESPs)
These savings plans are designed to help parents and grandparents save for post secondary education. The Canadian Government will contribute a minimum of 20% in grants to encourage and accelerate your education savings. The maximum contribution for each child is $2500 per year. However, you can contribute up to $5000 per year if you have not captured the maximum grant in previous years. Savings in an RESP grow tax deferred.
RESPs for Multiple Children
RESPs can be set up as individual plans for each child or as a family plan for multiple children. I tend to prefer the individual plans. I find families are better able to work toward their savings goals when they can see each plan separately. It also helps to make sure the first child doesn’t eat into the savings of subsequent children. For instance, if a child doesn’t pursue post secondary school, any savings accumulated in their individual plan can be transferred to other siblings.
I frequently get asked if more than one RESP plan can be set up per child. The answer is yes. There may be more than one parent or grandparent saving for a child’s education in some circumstances. Multiple plans can be established. But the government grant will be tracked by social insurance numbers and will not exceed the annual limit.
For more information about setting up an Education Savings Plan for your child or grandchildren, please contact Heidi.