Over the last few weeks, thousands of Canadian high school students have been deciding on whether or not to accept university and college entrance offers. Given that total expenses for a four-year degree can run as high as $60,000 or more, some families may be struggling to find the funds to finance post-secondary education.
As the costs of a post-secondary education increase, BMO advises Canadians to consider opening a Registered Education Savings Plan (RESP).
RESPs allow a parent or guardian to save money for their child’s university or college education. They offer several advantages, including:
– Tax-free growth (while the investments remain in the RESP)
– Up to $500 a year in Canada Education Savings Grants ($7,200 lifetime per child)
– A wide range of investment options
– Lower tax rates when the growth and grants are withdrawn for post-secondary education purposes (taxed at the student’s marginal tax rate)
However, simply opening an RESP is not enough. “Given the mounting costs associated with a post-secondary education, it’s critical that parents not only open an RESP as early as possible, but contribute to it regularly as well,” says David Sharone, Product Manager, Registered Plans and Solutions, BMO Mutual Funds.
BMO Financial Group offers the following RESP savings tips for parents and their campus-bound children:
– Give the gift of an education – Encourage family members and close friends to contribute to your child’s RESP on birthdays and holidays instead of, or in addition to, conventional gifts
– Know your limits – Parents, or young couples with plans to have children, should work together to determine a monthly budget that accounts for long-term savings, with a focus on RESPs
A paper bag lunch is all gravy – Bringing a lunch from home every day can save upwards of $100 per month, resulting in extra funds which can be used to increase your pre-determined RESP contributions