5 Importance of RESP You Need To Know Right Away Before It’s Too Late

3 years ago @geek 0

If you’re a parent of a child who has big dreams and aspirations, then I’m sure the financial need of your child’s future education is a constant source of worry for you. Education is important nowadays and with the growing competition and number of well-qualified graduates coming out of college every year, giving your child a good education is important for him/her to make their place in the world.

College education is not cheap and for families that don’t have much savings in the bank, it can be quite difficult to manage. After all, not every child gets a full scholarship and as a parent, it is our duty to see to that our child’s dreams are fulfilled, right?

However, even if saving up for your child’s education is difficult, it is not impossible. Starting a Registered Educational Savings Plan (RESP) can help you save without a lot of stress.

Here are 5 reasons why opening an RESP for your child is important:

1. Reduce Your Child’s Stress and Workload

There’s homework and there are surprise tests and exams – these things are enough to get a student stressed out. In addition to this, if they have to work long hours doing a part time job to save for their future, then it will definitely take a toll on them. Working and paying for their own needs is important and should be encouraged, but students feel a lot less relaxed when they know that they have other alternatives too and this helps them do better at school.

2. RESP Is A TaxFree Savings Plan

The investments you make towards a heritage RESP account are tax-free and all the interest and capital gains you acquire from the plan are completely non taxable. This means that if you invest sooner, you can save a lot of money without any of them reduced for taxes.

3. Contributions By The Government

Grants such as the Canadian Education Savings Grant (CESG) are given to RESPs. This grant depends on the total amount of contributions you make every year and can increase the worth of your investment by 20% for every dollar you save using heritage RESP. Also, sometimes if you enroll your child for heritage RESP very early, educational bonus of 15% of your monthly contributions will be added to your savings. This helps your money grow and multiply and it becomes easier to save more and more to meet the educational expenses of your children.

4. Dedicated Savings Plan for Education

Often, we plan to save money for our children’s education or other investments, but we fail to do so because something or the other always comes up. If we do not have a dedicated savings plan for our education, we might not save as much as we had intended and end up spending the money on other immediate financial expenses that always come our way. By opening an RESP, whatever the financial situation at home is, we make sure we contribute towards the plan consistently.

5. Student Loans Can be Reduced

Tuition fees are increasing and majority of the students are opting for student loans to pursue their education. While this is a convenient scheme provided to students with big ambitions, it can also be limiting in the sense where when the loans grow, the student is obliged to find a good paying job to pay back their loans. Plans of higher studies might get hindered due to this. Starting out in debt is always scary, but if it is inevitable, it is always better if the loan is smaller.

There are very few things in life that are as important as education and it is up to us to provide our children with good education in order to secure their future. Opening an RESP can be good for the children as well as parents, because they can go a long way in reducing stress and worry about the future.