It’s that time of year again: tis’ the season to save! Maximize your grants by December 31 before the busy holiday sets in. Before you even start your shopping, wouldn’t it be nice to check your year-end RESP contribution off the list? Here are some tips to help you save, as much as your budget allows.
Look for ways to scale back
Review your budget to see if there are areas you can cut back on spending. Consider making dinner at home over getting takeout, shopping secondhand or on sale, or setting smaller limits on holiday gifts and reducing your shopping list. Any contributions that can be made to your child’s RESP now can really add up in the long run.
Think about what you’re not spending and save it
Consider anything you’re not spending on right now due to the pandemic as “free” money to invest into your RESP. Many of us are saving when it comes to childcare services, paused/cancelled gym memberships or a reduction in transportation and parking expenses (for those not commuting to work every day). Why not take what you’d spend on some of those everyday expenses and put that into your RESP. By contributing during a down period in the market, you’re setting yourself up for potential gains when the market rebounds.
Don’t miss the December 31 deadline
Each year, the Canada Education Savings Grant (CESG) earns you an extra 20% on the first $2,500 contributed to your child’s RESP. Depending on how much you contribute, that could be up to $500 annually, per child. By taking advantage of this savings opportunity every year, you could receive a maximum of $7,200 from CESG by the time your child is ready for school.
Check if you’re eligible for extra grants and bonds
Depending on your income, you could earn an additional 10% or 20% from the CESG on the first $500 contributed each year — up to $50 or $100 per child, per year. You might also qualify for the Canada Learning Bond, an initial grant of $500 plus $100 per year until your child turns 15, up to $2,000 per child (based on adjusted net family income and number of children).
It’s ok to take a contribution break if you need to
You’ve worked hard to build your RESP and in time, your efforts will pay off. Which is why cancelling your RESP plan could upset all of the investment growth, government grants and potential bonus money you’ve earned up until now. If you’re having trouble budgeting, it’s better to pause your contributions than cancelling them altogether.
Think of this upcoming holiday season as an opportunity to spend a little less and save a little more for your RESP. After all, the gift of post-secondary education is one of the bests gifts you could give your child!