Children's education: Top savings plan insights
(NC)—It used to be, the most expensive part of back-to-school shopping was replacing the clothes your children outgrew, but now laptops are replacing lunch bags as standard equipment for elementary school, and upping the ante of education.
Cast your mind's eye to their graduation, and the costs of post-secondary tuition, and you will realize this is only the beginning.
“No need for a second mortgage,” consoles Peter Lewis, a vice president with the Canadian Scholarship Trust Foundation (CST), which sponsors the Canadian Scholarship Trust Plan. “Your savings for a child's education can easily grow to $70,000 or more, with early preparation, regular contributions to a Registered Education Savings Plan (RESP) over 18 years, and supplementary grants from the federal government.”
If you save just $209 every month, or $2500 a year, in a savings account over 18 years, by the time your child is ready to start post-secondary education, you'll have put away $45,000, which is no small sum. But have you seen the costs of education these days? Tuition, room and board, books…
If you invest the same amount of money on that same schedule in an RESP, you'll be entitled to an additional $7,200 in Canada Education Savings Grants from the federal government. With an assumed annual growth of three per cent, which is a significant step up from the interest rates banks offer, and lower than what group plans like those offered by CST routinely generate, your investment of $45,000 would be worth more than $70,000 by the time your child is ready to start paying tuition.
“The earlier you start saving, the more you benefit from compounded growth. There are all sorts of options for RESP investments,” Lewis continues, emphasizing the value of speaking with a knowledgeable RESP professional.
RESP's are also a great way to teach your children about the value and importance of a long-term savings strategy, whether it's for a car, a home, or for their retirement.
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