Easy as R-E-S-P: Here's how to start saving for your child's education
While most parents put saving for their kid's education as a priority, it can be hard to know where to start. Personal finance expert Lesley-Anne Scorgie keeps her advice simple— start socking away $50 a month in an RESP.
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There are a few things that can thwart your retirement plans; job loss, not saving enough and... children.
According to Knowledge First Financial, by the time your newborn is ready to go to college or university, a four-year educational program is could be approximately $123,500 with tuition, books and related expenses.
What will you do then? Cash in your retirement savings or sell your house?
No way! That’s a terrible financial plan. That’s what so many parents end up doing and it crushes retirement dreams faster than you can say “R-E-S-P”.
A recent poll has indicated that while four out of five parents say saving for their children’s education is a priority, one in three haven’t even started!
It only takes $50 per month of savings today in an Registered Education Savings Plan (RESP) to pay for one year of school for your child in 17 years from now.
And if you want to give your child a full-ride through their four-year post-secondary program, you should set aside $200 per month into their child’s RESP.
Hands down, RESPs are the most effective tool to save for this exurbanite future education cost because there are boatloads of free government grants available for parents to boost RESP savings.
When both your money and the government grants are invested in a conservative RESP portfolio, it grows through the power of compounded interest and reinvested returns by two or three times the value over 17 years.
It might seem next to impossible to scrounge up money for a $50 per month RESP contribution— let alone $200— because new parents have mortgage payments, groceries, gas, haircuts and sports registration fees.
But I promise you can do it.
Look at your monthly budget. Specifically review automatic payments for things like gym memberships that aren’t being used or wine club orders. Trade in your high-end chopped salad for one you make at home. Try generic brand food and cancel registrations in expensive private programs.
If you’re a fancy coffee drinker, it’s probably costing you $5 a day, which adds to $150 per month. Could you find an alternative?
Last, make saving a family affair. Rather than more gifts of barf blankets, stuffed animals and glass bottles for your baby, ask people to pitch in towards the child’s RESP.
Not sure where to start? Apply for a social insurance number for your newborn. Then seek the help of an RESP specialist who can guide you through the process of setting-up the account as well as applying for grants.
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