It may be tempting to buy another adorable outfit or a flamboyant toy for your baby, but saving for his or her future is a wiser decision. Although certain financial constraints may sometimes limit you from saving for your child’s future, it is a worthwhile investment considering the rising costs of education in Canada and globally. Most new parents find it daunting to think beyond their baby’s next feeding; however, if you can start early and integrate some education saving plan into your living-expense budget, you will be astounded at how much you can save up at HeritageEducationFunds.org
One of the most recommended ways of saving for a child’s education is through Registered Education saving Plans (RESPs). By definition, RESPs are government-registered savings plans that are designed to help you save for your child’s post-secondary education. RESPs have been in their current form or details since 1998 and are considered to be the most popular way for parent to save for their children’s higher education.
Benefits of RESPs
RESPs offer two major benefits. First off, money saved in RESP investment accounts are allowed to grow tax-free. This means that money invested in RESPs can grow without the federal government taxing the returns every year. When the amount invested is used to pay for college education, it is the child who will be required to report the income and not the parents. Since the child’s income will be considerably low in most cases, the tax bill will be smaller.
The second benefit is the financial contribution that the Canadian federal government makes to a child’s education. Depending on the income of the family, the government, through the Canadian education savings grant, will pay out between twenty to forty per cent of the first five hundred dollars that parents contribute towards their children’s RESPs. There is also an additional grant of approximately four hundred dollars annually on the subsequent $2000 worth of RESPs contributions—a guaranteed return on investment of a whopping 20 per cent!
The only hard part of beginning a saving plan for your child is deciding how and where to invest the RESP. Consulting with a financial planning expert is the best way to wade through the many options available. Remember, all a child need to be enrolled as a beneficiary of an RESP is a social Insurance Number (SIN). Take a closer look at how much more you can save for child’s education by starting an RESP saving plan sooner.