The government of Canada will give parents money that can be used for their children’s or grandchildren’s post-secondary education. The plan is called the Canada Education Savings Grant (CESG) and it works in conjunction with a Registered Education Savings Plan (RESP).
The good news is the gift totals $7,200 per child. The bad news is most families do not take advantage of this generous grant.
I will provide an example of how parents can plan to save for their children’s post-secondary education while collecting the $7,200 government grant.
Start saving $2,500 per year in an RESP when your child is born, or hopefully at a very young age. The government will contribute 20 per cent of any contribution up to $500 per year, over the lifetime of each child, with a total grant of up to $7,200.
After fifteen years you will have contributed $37,500 and the government will have contributed $7,200.
Breaking this down further, parents who contribute just less than $7 a day for 15 years will help assist their children to continue their education, and successfully launch into a competitive world where additional skills will greatly enhance their career opportunities.
If your child is bound for university away from home, the average cost can be $20,000 per year. So, the cost of a four-year undergraduate degree could cost $80,000, or higher.
Most families find it difficult, if not impossible, to make this kind of investment in their children over four years. This financial difficulty increases if more than one child continues with their education at the same time.
Assume you received a rate of return of 6 per cent each year the total amount available per child for eighteen years would be $87,800.
A good idea for many is to start monthly contributions to an RESP. Contributing just pennies more than $208 per month will allow you to reach the $2,500 annual target.
Post-secondary education is a significant benefit for every child, but it is expensive.
Consider starting a Registered Education Savings for your children or grandchildren and taking advantage of the Canada Education Savings Grant.