If your child has just started school, you may have already started thinking about getting them enrolled in one of the best educational institute that’s there in the country. That’s what every parent wants; to get the best education for their children. At the same time, the rising costs of higher education may be a bit of a concern, but you have started an RESP account and it would cover the complete education costs. At least that’s what you think, institutions are increasing their tuition fees every year and that might give rise to the question that if an RESP account would truly cover everything. Well, read on to know how much an RESP account would actually cost for a little one’s higher education expenses. You can also contact Canadian LIC for further details.
What is an RESP account?
For those who do not know much about RESP, let us shed some light. A Registered Education Savings Plan or an RESP as it is better known, is a tax-sheltered savings vehicle where you can deposit cash for your child’s higher education. You can make a maximum contribution of $2500 per year and the contributor can be anyone, the parents, a guardian; anyone. However, the best part is, the Canadian government also partners with you and adds 20% of the total contribution every year which sums up to near about $500 of the total amount. This amount is known as the Canadian Education Savings Grant (CESG) and it goes to the beneficiaries’ RESP account. If you are worried about not able to contribute the total amount in a year, no need to worry, you can deposit extra in the following year without any penalty fee. You can find out more about RESP by getting in touch with our team at Canadian LIC.
The big question: Would RESP cover all higher education costs?
Now, this is the most important aspect of the topic. Whether or not if the RESP account you have started would cover the complete costs. At Canadian LIC, we use a special calculator which takes into account factors such as the annual rise in tuition costs and the growth of annual investments. Another factor is, if your family income is more than $47,630 then you won’t be eligible for the Canada Learning Bond. So, to max out the CESG grants received, you will have to contribute $2500 annually.
So, if the total education cost is $83,504.02, then on a planned contribution of $2500 the lifetime saved amount would be $100,092.14. This lump sum amount is a combination of your contributions, the CESG grants, and investment return. You will save at least $16,588.12 by the end of the final year.
In other words, if you start saving early for your child’s education then the RESP account will be more than sufficient. If you have any queries, feel free to get in touch. Don’t wait anymore, take advantage of the government’s free grants, open an RESP account today!