Statistics Canada has reported about half of the Canadian families having an RESP plan, much lower than Canadians holding a registered retirement savings plan (RRSPs) and a tax-free savings account (TFSAs). This might seem harsh on the part of retirement-conscious families not building a secure education fund for their children. Still, it only reveals the crude economic realities of present-day Canada.
Soaring university costs are not within the savings capacity of low-income and middle-income earning Canadian families. Besides, many are wary of the eventuality where their kids may not choose university studies, making an RESP plan an altogether pointless investment choice. All fears granted, there are smart options to dodge perceived uncertainties.
Investing in government bonds, Guaranteed Investment Certificates (GICs), and RESPs guarantees the principal amount staying intact, even if they’re not used for your child’s education. Except that in transferring RESPs to your own savings account, the government-funded amount would have to be paid back to the government—none of these investment devices eat away your principal amount.
Getting parents still eager to fund their children’s academic dreams, rising tuition costs, and inflationary trends can be beaten with RESPs, which present various savings plans for families to adjust according to individual circumstances.
According to a Canadian scholarship trust (CST) consultant, Mr. Kidwai,” the cost of education is going higher and becoming expensive – beyond the reach of lower and middle-income members of the society.”
Why Do You Need to Save?
If your child is going to college for higher education, paying for college fees and related dues is one of your biggest financial concerns. Most parents aren’t able to fund using monthly cash flows. Starting an RESP savings plan early helps knock out this hurdle as it safely accumulates desired funds until your child is ready for university life.
RESP savings plans aid your children in choosing the university of their choice. According to Knowledge First Financial, a four-year education cost may top the $125,000 mark by 2037. To embark on the journey of funded education, Canada’s government is committed to helping the middle-class population by providing tax grants and benefits.
For more information on all the government grants available in your particular province, you should contact an RESP adviser that can help you through the process. Heritage RESP has offices and RESP advisers ready to answer your questions throughout Canada, and they have great reviews available online.
Apart from government initiatives, there are other inflation-beating methods. Life insurance plans, TFSAs, and well-planned endowment policies for children’s studies help parents gather funds efficiently than having to pin their hopes on risk-ridden investment options. When you choose such time-sensitive guaranteed plans, you let your child focus on their studies and grow in their field.
Choosing the Best Education Plan
Education endowment plans protect you from market risks and provide coverage for premiums invested by you. In addition, the Government of Canada will match 20 cents for every dollar you save, up to $7,200 per child. By saving up to the limit, you can get the most government money possible.
Before walking the meandering path to fulfilling your child’s education, you need to figure out your budget, establish savings targets, and chose the right endowment plan. It would be wise to note various competitive returns to compare the risk-return ratios of your investment instruments. Safest and most lucrative, RESPs are the best educational savings options with no associated costs.
Apart from the education savings plan, there are many other ways to save. Depending on your needs, you may invest in bonds and equities for good returns. However, given volatile market conditions, education savings plans are the safest bet to aid your child’s education. Compared to the fluctuating market value of the shares, education plans like RESP from providers such as Knowledge First Financial return great value for your contributions.