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Pattie Lovett-Reid: Our grandchildren don’t need more stuff.  This is why we offer them RESPs instead.

HUNTSVILLE, ONT. – We are the kind of grandparents who want the world for our grandchildren. It doesn’t mean they need more stuff. For us, that means they need some form of post-secondary education.

We truly believe that our grandchildren do not need another brand name piece of clothing, an expensive toy or a trinket that might soon be forgotten after their birthday or other special occasion to give a gift. We hope to participate in a gift that continues to give: an education.

The reason for this? Education is often seen as the great equalizer.

So – spoiler alert – our grandchildren will receive contributions to their Registered Education Savings Plan (RESP).

A recent Canada Life survey found that 92 percent of Canadians are aware of RESPs, but less than half (49 percent) currently use the savings tool.

That worries me.

Post-secondary education is expensive and recent graduates will tell you that the debt burden is a heavy burden for a recent graduate entering the workforce.

According to Knowledge First Financial, the average cost of a four-year postsecondary diploma by 2030 is expected to be about $ 111,698 with residency and $ 55,548 without.

Canada Life has found that those who have contributed to RESPs have an average total contribution of about $ 22,800, with the median monthly contribution being $ 210.

Now, to be fair, an RESP is not the only way to go. The survey found that 39 percent set up trust or bank accounts in their child’s or grandchild’s name, and 27 percent used tax-free savings accounts.

Both are great options, however, if you save through the RESP you can maximize your investment.

  1. The government will match your contribution up to $ 500 per year for a lifetime total of $ 7,200 per child, through the Government Education Savings Grant.

  2. The savings grow tax-free within the plan. Your money is not taxed, but the grants and accumulated growth in the plan are taxed at the student’s rate. However, as we know, most students will have little or no income, which will result in the money being withdrawn tax free.

  3. The money saved in an RESP can be used for books, living expenses, course materials, and other things in addition to tuition.

One final thought: our strategy is to invest early and often while using this gift as an opportunity to talk to children and grandchildren about their future, why we care about ourselves, and the opportunities that lie ahead.

And in case you were wondering … yes, there will be a small token handed out next to the contribution. We still want to have a little fun.


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