While there are many goals that you can strive towards as part of your new year’s resolutions, some of the most important are often associated with your personal finances – and for good reason.
Whether it’s saving, budgeting or educating yourself more on the ins-and-outs of your finances, January is often the best month to sit down and make changes, especially when mapping out your child’s education savings.
Often, focusing on these goals early on will lead to the biggest impact and improvement.
By opening up or focusing on your child’s RESP earlier on in the year, you are more easily able to take advantage of the Canada Education Savings Grant (CESG).
The CESG is essentially free money from the government for contributing to your child’s education savings plan.
With the grant, your child will be eligible to receive 20% of your annual RESP contributions without any strings attached, up to a maximum of $500 per year.
That means that you’ll have to put $2,500 towards your child’s education over the course of the year in order to take full advantage of the grant.
While it is certainly possible to do this all in one fell swoop, for many of us, incrementally reaching this goal is way more manageable. By contributing roughly $210 a month starting in January, you can reach this goal by the end of the year without having to put a ton of cash away at one time and lower your quality of life as a result.
The sooner you open up or contribute to your RESP, the sooner your money can start to work for you.
Funds deposited earlier on in the year have more time to grow and earn income, giving you a greater return in the long run.
And this doesn’t just apply to your own contributions or income on investments. The sooner you are able to receive the full CESG, the sooner it will grow too.
As an added bonus, unlike a standard investment, taxes on income held within RESPs are deferred, allowing you to grow your savings at a faster rate. When the time comes for the government to collect, your nest egg will also be taxed in your child’s hands instead of your own, leaving you with more money to put towards their education.
This can often be far more ideal than having your money sit in a savings account, earning less than a percent to start off the new year.
For all these reasons, opening up or contributing to an RESP as early as possible in the year is a great and efficient way to build your child’s education savings, so try not to hold off or scramble last minute!