We’re coming to the end of 2014 and as per usual, it’s time to consider a few New Year’s resolutions to start 2015 off right. Not all resolutions have to be about losing weight, exercising more or getting organized (although, you know I’m writing another post about THAT). We often make resolutions about our finances and this year, I’m making that a high priority. If you’ve been following along in this three part series, you’ll likely now know that I’ve had a reality check on what it takes to educate our children. In the first of the series, I discussed the 10 items you may be paying for in university. It was a shock to finally put all the numbers to paper and realize that the final bill in the spring of 2015 may total over $23,000 for the first year of post-secondary education. This financial ‘accounting’ took everything but the kitchen sink into my daughter’s journey to the University of Ottawa: campus scouting trips, application fees, residence, meal plans, trips home, tuition, books and even pocket money. The second instalment of the series was about ways you can save up for said costs: picking up extra writing work, summer jobs, scholarships and bursaries, RESP contributions and government grants (a bit more on that today). This final post is about three New Year’s Resolutions – Financial Planning for the Next Two.
Three New Year’s Resolutions
Coming up with a solid financial plan to SAVE.
This has to be one of the most important resolutions that I could make. Coming up with a solid PLAN TO SAVE. That means reviewing sources of income (more blog posts, freelance work, tutoring and summer jobs for my daughter). It also means committing to setting aside monthly contributions for each of the children, reviewing where our family funds are going to today, and making adjustments. That means making some hard choices on vacations, that new pair of boots or putting off buying a new car.
This also means review possible tax savings and government incentives to help us save.
- Adding more funds into the new RESP.
The sooner in the year we can add funds to the children’s RESP the better. As with most years, all three children receive Christmas cash from their grandparents. It’s never a given, but they’ve consistently received money that they’ve set aside for ‘bigger’ gifts. A few years ago, that was new ski equipment and a ski jacket for one and a school trip to Quebec City for another. Two years ago, my eldest put that cash directly into savings for her Me to We trip to Ecuador.
This year, all of those funds will go directly into their RESP accounts to stash away for their post-secondary education.
Taking advantage of the Government Grants and Tax Free Savings.
A Registered Education Savings Plan (RESP) is a tax-sheltered savings account. By setting up an RESP, you set the wheels in motion to take advantage of both federal and provincial saving incentives. The key to accessing these is to apply for a Canada Education Savings Grant (CESG) that matches your contribution (to a limit of $7,200) by the Government of Canada once a parent opens a RESP for a child. You can also access up to $2,000 from the Canada Learning Bond (CLB). Although I mentioned this in my last post, it is worth repeating that you can qualify for provincial grants, depending on which province you live in: for example: (1) the Alberta Centennial Education Savings (ACES) Plan (up to $800); (2) the Quebec Education Saving Incentive (QESI) (up to $3,600); (3) the Saskatchewan Advantage Grant for Education Savings (SAGES) (up to $4,500) and; (4) in 2015, the British Columbia Training and Education Savings Grant (BCTESP) (up to $1,200).
All these programs are subject to eligibility and may have age restrictions, but it’s a good idea to look into them because they could potentially provide you with extra funds to help you get your child a post-secondary education. Your RESP also offers tax sheltering on your investment income until the plan matures. Once your child is ready to use his/her RESP for post-secondary education, the funds are taxable under the student’s name. Because students commonly have high exemption status and low income, the taxes they pay should be low (if they pay any at all).
I am happy with this whole review. This RESP blog post series has been an eye-opener for my family but it has also proven to be effective in getting us motivated and moving forward with a financial plan for our children. It is obvious you can learn from the mistakes we made by not starting an RESP when they were young, but it’s never too late to start saving. We have three years before our next child goes off to university or college, and then two more years for the last one. With some luck and a lot of hard work, our eldest should have graduated by then and she will be on her way to a meaningful career. Until then, we’ll continue to work hard and save for their success.
Since you are going to be doing some savings for the future @DownshiftingPRO is giving away a $50 VISA GIFT CARD (in Canadian Funds) to one lucky winner.
Please note carefully: This giveaway is open to Canadian Residents (excluding Quebec) 18+ from Dec. 30 2014 to January 31, 2015. Entrants will need to supply a valid name (no nicknames or on-line name), IP address and email address for verification. They will have 48 hours to respond to the email as well as answer a skill testing question. If you do not contact me within this time another winner will be chosen. Please check your spam file.
Good luck to all that entered. Many thanks to Heritage Education Funds for sponsoring the Giveaway!
Disclosure: I have been compensated for the series of blog posts but all opinions are my own.