Maximizing education savings
The costs of post-secondary education are rising. A Registered Education Savings Plan (RESP Canada), which is a tax-sheltered education savings account that can help ensure that you and your children cope with those costs. By making the most of an RESP Canada— including smart investing for tax-deferred growth and eligibility for government grants — we can generate investment returns to help ensure you have enough education savings for your children.
What are the current costs and how much are they expected to go up?
• A 2009 study by one of the top five banks in Canada found the total cost of a four-year degree (including living expenses and academic fees) was $77,000.
• For those who lived at home with their parents, the cost was $52,000.
• The study predicted that by 2027 that cost would almost double — to $137,000 for those living away from home and $101,000 for students who stay at home.
• Statistics Canada recently reported that undergraduate students this year paid 4% more in tuition fees than last year and graduate students 6.6% more.
How can I maximize the CESG?
To receive the maximum Canada Education Savings Grant (CESG), you could contribute amounts annually to an RESP rather than a large sum at the outset; the grant is 20% on the first $2,500 contributed each year, to a maximum of $500 per year. However, an RESP strategy isn’t always cut and dried. If you have a large lump sum available (up to maximum lifetime RESP contribution limit of $50,000), we might explore investing it all to begin earning compounding tax-sheltered returns early. You would forgo some government grant money but you would immediately begin earning tax-deferred returns. A best strategy for managing the grant would depend on a discussion of your needs and situation.
Are there any advantages to a self-directed RESP?
Flexibility! There is a lot of flexibility with a self-directed RESP Canada, allowing us to take full advantage of the wide range of investments you can hold in an RESP Canada. We can work with you to make sure your strategy maximizes the savings and investment potential of an RESP Canada, as well as making the most effective use of government grants.
Regardless of what your child’s career direction will be, post secondary education will be one of the key components to his or her success. It’s never too early to start education savings and planning for your children. For more information contact Gary Mandel at Independent Financial Concepts Group by calling 416-849-1653 or visit www.wecoveryou.ca