podcast

Back-to-School Shopping: Stock up on RESPs

Published:29/08/2022


Investor Knowledge +
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Confident Investing

When your kids are small, back-to-school shopping means filling your cart with binders, pencil crayons and post-it notes. But by the time high school is nearly finished, colourful writing instruments become less of a priority and suddenly college and university brochures are scattered across the kitchen table. Granted, choosing a post-secondary institution is no small decision for a teenager, but it’s also no small expense for parents.

The average tuition for an undergraduate degree in Canada in 2021/2022 was $6,6931 -- and that's not including other necessary costs like books, housing, transportation and meal plans/groceries. At the end of the day, the cost of post-secondary education is an overwhelming burden for any parent. However, there are steps that can be taken to help lessen the burden.

The first step? Start saving now.

  1. Most children start post-secondary education around the age of 17 or 18 which means there is a limited amount of time for savings to grow. The sooner you can start contributing to a Registered Education Savings Plan (RESP), the more opportunity there is for the savings and/or investments to grow and make a meaningful contribution to your child's education and future financial success.
  2. Take advantage of government grants.
    • Basic Canada Education Savings Grant (CESG): This federal education grant can top up your annual contribution by 20%, up to $500 per beneficiary each year to a lifetime limit of $7,200 per beneficiary. The basic CESG is available for all RESP beneficiaries regardless of household income.
    • Additional CESG: Depending on your adjusted household income, you may be eligible for additional CESG. However, it's important to note that additional CESG counts towards the lifetime limit of $7,200 per beneficiary, meaning no beneficiary, regardless of household income, can receive more than that amount in CESG over their lifetime.
    • CESG Carry-Forward: If you are unable to maximize your contributions at any point, you can catch up in subsequent years up to the maximum lifetime limit of $50,000 per beneficiary without jeopardizing the amount of CESG that the beneficiary will receive over their lifetime. For more information on how this works, visit the RESP page on the Government of Canada website.
  3. Know your saving options.
    • Individual RESP: This plan can only have one active beneficiary and is a great option for people who are not blood relatives or legal guardians of the beneficiary but still wish to contribute toward the beneficiary's education. This includes family friends, godparents, and aunts/uncles.
    • Family RESP: This plan can save for one or more beneficiaries; however, the account owner (subscriber) and beneficiaries must be related by blood or formal adoption. Acceptable subscribers include parents, grandparents, great-grandparents, and siblings. Other relatives, such as nieces, nephews, aunts, uncles and cousins are not considered blood relatives under the Income Tax Act and, as a result, are not considered acceptable subscribers.

While post-secondary education may seem like a lifetime away, especially when you are still dealing with diapers and a lack of sleep, starting early and knowing your options is the best course of action to help lessen the burden of paying for your child's education. Talk to your investment professional today to learn more about RESPs and the steps you can take to better prepare for your child's future success.

1Source: Stats Canada. Tuition fees for degree programs, 2021/2022. 2021-09-08.

The information contained herein has been provided by TD Asset Management Inc. and is for information purposes only. The information has been drawn from sources believed to be reliable. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.

TD Asset Management Inc. is a wholly-owned subsidiary of The Toronto-Dominion Bank. ® The TD logo and other TD trademarks are the property of The Toronto-Dominion Bank.


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