Financial Perspective – Making the most of your RESP – and introducing your kids to finance at the same time
The registered education savings plan (RESP) is a practical tool for accruing savings for your children’s postsecondary education. But one of its great strengths is sometimes overlooked.
Every year, the return to school season provides a reminder that the education of children involves a substantial expense on parents. This is all the more true when contemplating the cost of postsecondary education, where the outlay for each term may be several thousands of dollars. Fortunately, the registered education savings plan (RESP) provides a tax-sheltered environment to save for this goal, and also offers substantial grants.
What people don’t always realize, though, is that this tool is based on a principle that is just as vital as those grants: compound returns over time. In fact, the RESP offers an ideal opportunity to rediscover the importance of compounding and also to explain it to your kids as a way of introducing them to the basics of investing.
The RESP in brief
The RESP is a savings plan that allows you to contribute up to $50,000 over the plan lifetime to save for your children’s postsecondary education.
An RESP offers two big advantages…