That magical time of the year has come around once again. The days are getting shorter and the snow has begun to fly. Soon many Canadians across the country will be celebrating various winter holidays that will feature special feasts and lots of gift-giving. December is also the time of year that many parents need to think about topping up their RESP contributions to enjoy the full matching benefits available through the Canadian government’s Canada Education Savings Grant (CESG)
Through the CESG, the first $2,500 contributed annually to each beneficiary’s RESP can receive up to 20% in grant benefits to a maximum of $500 per year. That could add up to as much as $7,200 per child. But contributions must be made before December 31 each year to be eligible for the grant—unless there is some carry-forward room
in the RESP. Many families contribute monthly to their children’s RESPs, but depending on their budgets, not all families are able to take full advantage of the CESG unless they top up before the annual deadline. But topping up at this time of the year can be tricky with all the extra costs associated with the winter holiday season. This is where friends and family can help parents give a meaningful gift that has real lasting power.
According to our survey
of Knowledge First Financial clients earlier this year, respondents indicated that less than 6% of families ask for contributions to their children’s RESPs in lieu of gifts. In fact, 77% of families are trying to save for their children’s education on their own. As the holidays approach, aunts, uncles, grandparents and friends will be looking for the perfect gift for the children in their lives. Some will give cash, while others will choose gifts and clothes that children may or may not make use of. The holiday season is a perfect time to suggest a contribution to an RESP, to anyone who wants to give a unique present that keeps on giving.
Of course, part of the fun of gift-giving is seeing kids’ eyes light up when they open a present, and making a contribution to an RESP doesn’t have to be boring. If kids have a sense of what they might like to do when they grow up
, a book about their interest or a gadget that can help them learn more about a field they’re interested in could be an exciting companion gift. Most kids don’t really know what they want to do for their careers, though, so a small gift that helps them explore their passions
today along with the RESP contribution could add up to having a positive lasting impact for children today and into the future.
Inevitably, kids grow out of toys and clothes, but the gift of education endures forever. Even a small contribution annually until a child has turned 18 will add up over time with the CESG benefit along with compound interest that will remain tax-free until the funds are withdrawn. Children born in 2019 can expect to pay overall tuition fees of close to $70,000, plus the cost of room and board. So, a small financial gift in the form of an RESP contribution today could go a long way in helping children achieve their education and life goals.