The RESP: What I Learned about Saving

When K was born, there was a huge push to start saving for her education. This idea both confused and intimidated me; after all, there were so many costs associated with having a baby, and adding an additional one was a bit terrifying. An RESP was a foreign concept to me…a four-letter word I had no frame of reference for. And yet, I liked the idea. I liked knowing that by making small sacrifices now (a few dollars here and there), we could potentially help K graduate from school with no debt.

My parents let me know from a young age that they would pay for half of my schooling. I was incredibly blessed to have this opportunity; so many others don’t have a chance like this. Thanks to their contribution, and some great scholarships along the way, I graduated school with no debt whatsoever. J’s mom helped him out with school as well, and though he had some debt, it was nowhere near what it could have been. We are both incredibly grateful that our parents were able to assist us, and we knew that we wanted to do the same for our kids. So many of my friends are well into their twenties and thirties and are still buried under school debt; if K can avoid that, we’d be thrilled.

What is an RESP?
A Registered Education Savings Plan is a tax-sheltered plan that can help you save for your child’s education. It combines flexibility, tax-deferred investment growth, and direct government assistance to help you reach your savings goals.
An RESP can be set up for any beneficiary you like; children, grandchildren, nieces and nephews, or family friends.
Any amount can be contributed to an RESP, up to $50,000 per child. RESP contributions aren’t tax-deductible at the time, but any investment earnings are tax-deferred. Any withdrawals from an RESP are taxed in the hands of the child, which usually means they pay very little (or no) tax. And best of all, there is no charge to set up an RESP, and no annual fees.

To be honest, I thought that an RESP would be a nice thing to have, but definitely not something that I thought we could afford. But a small amount saved each week can grow into a sizable helping hand but the time your little one graduates high school. During K’s first year, she received many presents (that she really didn’t need/notice) from well-wishing friends and family. Those $20 toys added up to a whole lot of cash. Could you imagine if we had known about RBC’s RESP plan? With this plan, family members can donate money to a child’s RESP at any time.

Some tips from RBC’s RESP page that you might find useful:
1. Start by investing a realistic amount regularly: for example, $25 a week can grow to over $50,000 in 18 years; more than enough to cover education costs.
2. Take advantage of ‘free’ money: the government will match 20% of the first $2500 contributed each year to an RESP.
3. Set it and forget it: the RBC has an RESP-Matic to help you set up a monthly savings plan. Check out http://www.rbc.com/education for more information.

What did you know about RESPs before having kids? Is saving for their education something you’ve thought about? If you’d like to enter for a chance to win $500 towards an RBC RESP for your child, enter here! http://bit.ly/1tY3nGZ

Disclosure: I am part of the RBC RESP blogger program with Mom Central Canada and I receive special perks as part of my affiliation with this group. The opinions on this blog are my own.

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