September is just around the corner and while it’s bound to be a uniquely challenging school year for students and parents alike, it’s also a great time to invest in your children’s future. After living through months and months of uncertainty, who isn’t thinking about ways to create a better, more secure tomorrow for their family? We’ve all had enough surprises to last a lifetime (thanks, 2020!) so now, it’s all about the planning – and early preparation for post-secondary education is a great place to start.
Today’s job market demands a higher level of skills and education than ever before, and it takes work to get there. College and university programs are increasingly expensive, and the cost of tuition, learning materials and living expenses can create some very real barriers for students. Personal and student loans may be available but at the end of the day, no one wants to graduate with a mountain of debt. Fortunately, there are ways to easily and affordably set up your child for success. It’s never too early to start saving, so let’s talk about RESPs.
When you think about the different ways to save for your child’s education, a Registered Education Savings Plan (RESP) is likely top of mind – and for good reason. RESPs are awesome! They’re an effective investment tool that helps families save for post-secondary education in a flexible, convenient, tax-efficient manner. Anyone can open an RESP for a child: parents and guardians, grandparents and other family members, even godparents or other close family friends. Some plans require you to make monthly contributions, while others give you the flexibility to contribute whenever it makes sense for your family (on special occasions, if you earn a bonus at work or your child receives a financial gift, for example). This money is able to grow tax-free in the plan for up to 36 years (far longer than most families require), with a lifetime total contribution limit of $50,000 per child, across all RESPs (students can have multiple RESPs). When funds are eventually withdrawn from the RESP for a student beneficiary, it is taxed in their hands, at their typically low-income level. Pretty simple, right?
Extra Money? Yes, please.
In addition to monetary contributions and cumulative investment income, RESP beneficiaries have access to several government grants. The Canada Education Savings Grant (CESG) provides up to $7,200 per child over the lifetime of an RESP, by matching 20 percent of the contributions to a maximum of $500 per year. Some families may also qualify for the Canadian Learning Bond, which provides financial support to lower income families. The earlier you get started saving in an RESP, the more time your RESP contributions will have to grow!
Choosing an RESP that’s right for your family
Not all RESPs are created equal, and you’re going to want to put your money where it can grow safely and effectively. While many parents default to their bank when opening an RESP, that might not be the best option for your family. Consider CST Spark Inc. (a subsidiary of The Canadian Scholarship Trust Foundation, whose mission is to break down financial barriers to post-secondary education). CST created the first education savings plan and successfully lobbied for government grants to boost education savings. To date, over 570,000 Canadian families have put their faith in CST. That’s a lot of tuition cheques!
CST Spark offers the CST Bright Plan. Here’s how it works: It’s a first-of-its-kind, diversified, low management fee digital RESP that can be opened easily and conveniently from the comfort of your home, and it rebalances your investments as the beneficiary gets older. Essentially, this strategy, managed by experienced investment managers, rebalances investments with a goal of maximizing early growth (with equities) when the beneficiary is young and then maintaining gains (with fixed income securities) as they approach their high school graduation. Parents and other subscribers can control how much and how often to invest with a minimum initial investment of $500, or by contributing as little as $10 per month. Flexible options mean you can increase your contribution, change your schedule or add one-time contributions easily to meet your personal needs and goals. If you have more than one child or plan on adding to your family, a family plan can be opened. It’s a smart, simple and flexible way to prepare for the cost of college or university.
Preschool today, college tomorrow
One minute, you’re holding a newborn baby in your arms and the next thing you know, they’re walking onto a university campus as you wave encouragingly and blow an embarrassing number of kisses in their direction. When they say the days are long, but the years are short, this is exactly what they’re talking about. (BRB, crying.)
We know times are tough for many families, but tuition isn’t getting any cheaper and a little planning now can create a tremendous amount of relief later. One great thing about this plan is that once you set up your plan online, it’s easy to maintain – just contribute whatever feels affordable and watch your savings grow along with your kids. Being this financially savvy is sure to bring some peace of mind, so go on – you deserve it. Opening a plan only takes around 10 minutes! And your kids will thank you later.
This is a sponsored post in partnership with CST Spark. All opinions and commentary are SavvyMom’s and should not be construed as investment advice. C.S.T. Spark Inc. is the exclusive distributor of CST Bright PlanTM which is only sold by prospectus.