How do I save for my child’s education?
For many parents and grandparents, one of the biggest questions that arises is “how can I save for my family’s education?” The team at Ostic Financial believes that this answer is simpler than many people think.
The number one thing that we suggest is to set up a Registered Education Savings Plan (RESP) for the child. An RESP is a great option for parents and grandparents looking to save for their child’s education. You will receive a 20% grant on the first $2,500 worth of contribution, per child, per year. This means that you’ll receive a maximum grant of $500 into your RESP.
The growth of the RESP account is sheltered from tax as long as it remains in the plan, only being taxed once money is withdrawn. When money is withdrawn, the grant and growth portion will be taxed in your child’s hands, not the principal (what you deposited). This is beneficial, because as a student, your child will pay little to no tax on the money.
RESPs also allow for flexibility in the withdrawal of money. Your child can decide how much to withdraw and when to withdraw (within minor limits); they’re not required to withdraw all of the money at once. Whenever education expenses such as tuition, books, or rent are due, your child can freely use the money saved in the RESP.
While all of the previous benefits are great, the biggest benefit that an RESP provides is the opportunity for your child to focus on their education without having to juggle part-time jobs to cover expenses. This focus will allow them to reach their highest potential while at school, setting them on the right path for a successful career and life.
If you’re interested in opening an RESP for your child, or simply want to ask some further questions, contact us. It’s our job to make saving for your child’s education simple.