Whats the Big Deal?

The news coming out of the USA that up to $10,000 of student debt was being eliminated for most students by the government has dominated the news these days as we once again approach the beginning of school.

And it’s no wonder why that’s such a big deal as post-secondary costs continue to rise not just in the USA, but right here in Canada.

The Cost

Did you know that according to Statistics Canada, the average 4-year degree beginning in 2022 will cost over $96,000 when including costs like tuition, books, and housing costs?

This is why it’s truly more important than ever to begin financially planning for your education, or your childrens education, as early as possible. And we can help!

What is an RESP?

An RESP is a Registered Educations Savings Plan where the government matches up to 20% of your contributions into your education savings (up to $500 per year and $7200 lifetime). In fact, depending on other factors like household income, you may qualify for even more than $500 due to programs like the Canada Education Savings Grant.

Contrary to what many believe, an RESP doesn’t just have to be invested into a savings account – it can be invested in a variety of ways including savings accounts, GICs, Mutual Funds, and more. At PenFinancial, in partnership with Aviso Wealth, we recommend investing your RESP according to your risk tolerance and with the understanding that you'll need access to the money as your child is finishing up high school and progressing through post-secondary.

RESPs can get a little complicated though, as there are different options like a family RESP, individual RESP, the Canada Learning Bond application, and more that we’re more than happy to fully explain and walk you through the process.

The Power of Starting Early

Just like saving for retirement, starting early is the greatest factor that determines how much money will end up in an RESP for education by the time your child turns 18. Here’s just one example:

Suppose you’re saving exactly $2500 per year to maximize the $500 grant from the government, and invest that money into a diversified mutual fund portfolio with a Mutual Funds Investment Specialist that earns 7% per year. In that case, you’ll end up with $102,920.31 when your child turns 18 years old. The best part is less than half of that money would have been contributed by you, as the total contributions would only end up being $45,000 of that $102,920.31. Of course, earning 7% per year is a big assumption and not guaranteed by any means, but it’s a great example of what can be should you make a plan and stick with it.*

Lets Chat

As always, come chat with us to find out if an RESP is right for you and your family. As education costs continue to rise, now is the time to make a plan that works for you.

*Rate of return is not guaranteed.
Note: Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.. Online brokerage services are offered through Qtrade Direct Investing. Mutual funds and other securities are offered through Aviso Wealth. Qtrade Direct Investing, Qtrade Guided Portfolios and Aviso Wealth are divisions of Aviso Financial Inc.

At PenFinancial Credit Union, eligible deposits in registered accounts have unlimited coverage through the Financial Services Regulatory Authority (FSRA). Eligible deposits (not in registered accounts) are insured up to $250,000 through the Financial Services Regulatory Authority (FSRA). Learn more here →