Young families with modest incomes have much to gain when it comes to saving for their child’s education with a Registered Education Savings Plan (RESP). Through the Canada Learning Bond (CLB), the government will contribute an initial $500 per child, then $100 each year until the age of 15 to a maximum of $2,000.
A recent survey by Ipsos for Knowledge First Financial found saving for education is the top priority for Canadian parents with children under the age of 14 -- 92% of parents with children in that age range said ‘saving for education’ is just as important as paying off debt and saving for retirement.
While 52% of parents with children under the age of 14 surveyed reported taking advantage of government incentives available through an RESP, awareness of the benefits appears to be an obstacle for some. When it comes to the income-tested Canada Learning Bond, a clear majority of eligible parents are not taking advantage, with more than third saying they were not aware of this education saving grant.
During Education Savings Week, Knowledge First Financial is joining community organizations and other RESP providers across Canada to raise awareness of benefits of RESPs and how CLB can help young families kick start their education savings.
Who can receive Canada Learning Bond?
Net family income and the number of children in a family are considered together to determine CLB eligibility. Starting July 1, 2017, the following qualifying guidelines apply:
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- A family with up to three children and an adjusted net family income of $45,916 or less
- A family with 4 children and an adjusted net family income of $51,809 or less
- Net family income threshold increases with each additional child
Unlike other government education savings grants, RESP contributions are not required to receive CLB. For parents just starting careers or families living on one income, now could be the perfect time to apply for Canada Learning Bond. Once the initial $500 CLB is deposited into an RESP, the ongoing $100 CLB contributions are automatically made each year based on eligibility.
Starting early means more in the end. A child who receives the full $2,000 CLB amount beginning as a newborn, could see RESP savings grow to $3,200 in 15 years, based on a 5% rate of return and the power of compound monthly growth. No tax is paid on the income earned until the money is withdrawn by the student.
By opening an RESP when a child is very young, government education savings grants, tax-deferred income and compound growth work together to turn small amounts into funding to pay for tuition and education-related expenses. Whether it’s full- or part-time studies at a college, university or trade school – an RESP can reduce the financial worries and open a world of possibilities for a child. During Education Savings Week, kick-start your education savings by opening an RESP for your child.
These are some of the findings of an Ipsos poll conducted between August 3 and 15, 2017, on behalf of Knowledge First Financial. For this survey, a sample of 1,919 Canadian parents from Ipsos' online panel was interviewed online. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.6 percentage points, 19 times out of 20, had all Canadian parents been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.
About Knowledge First Financial Inc.
Canadian families have relied on education savings plans offered by Knowledge First Financial for more than 50 years. Today, the company manages more than $3.72 billion in assets on behalf of more than 250,000 customers. Since 1965, payments from the plans have reached $3.9 billion and the Knowledge First Foundation has further enhanced Education Assistance Payments to students by nearly $50 million.
Knowledge First Financial Inc. is a wholly-owned subsidiary of the Foundation and is the investment fund manager, administrator and distributor of Registered Education Savings Plans. Knowledge First Foundation is a not-for-profit Canadian corporation with no share capital. The Foundation is therefore able to reinvest excess revenues in initiatives that support student success.