The Gift of Education

It’s the holiday season and there is one type of gift that will carry a young person through their entire life. It is the gift of education.  When high school ends, and young adults look forward to entering a post-secondary institution, the costs of tuition may be surprising.  Tuition alone can range $3000-$4000 a semester, before one factors in housing, food, and transportation.



Initiate Financial Planning Early For Post-Secondary Education Savings

To get ahead of these looming expenses, it’s best to start early to save for post-secondary education.  A parent, grandparent, or guardian can make contributions to a Registered Education Savings Plan “RESP” for a child(ren).  The contributions can be made monthly, annually or on an ad hoc basis. From birth to 12 months of age, a child has accumulated $2500 worth of contribution room and has a lifetime contribution limit of $50,000. Each year that $2500 is contributed, an education grant of $500 is automatically available and applied for.

This grant is a 20% increase on the contributions made by their adult loved one before being invested. If the contributor can’t financially make the entire $2500 amount, any contribution that they do make will receive a 20% grant on their contribution. It’s a win-win for the future student.

Setup Monthly Contributions For Your Savings Plan

We recommend a monthly contribution for any savings plan. This is partially because it’s often easier on the budget for working adults and pensioners. We also believe that the best opportunities come from dollar cost averaging.  Dollar cost averaging is just buying an investment on a regular consistent basis, often monthly, allowing the saver to take advantage of the ups and downs of the markets. If someone saved monthly in 2022, they would have picked up great investments at a discount price and then as prices picked up in 2023, they got them at a great price which is advantageous for long term wealth accumulation.

Few are aware that when the student redeems money from their RESP (Registered Education Savings Plan), it is considered taxable income to them. This is generally not a concern because few students earn enough income to pay income tax at all even between part-time jobs and redemptions from the RESP.  

Feel free to reach out and ask us a question about finances that you’d like answered. We’re more than happy to answer you personally.

Taivi Tayler, RRC^®, CLU^®, Certified Financial Planner^®

 www.taylerinsurance.com