Finance your child’s future with RESPs, experts advise

If you’re looking to finance your child’s future education and you want to contribute to an RRSP, too, chances are you face this moral dilemma: Help your kid, or help yourself.


It’s just good sense to contribute to an RRSP, but if you’re a young parent or parent-to-be, consider Junior’s future post-secondary education isn’t getting any cheaper. The time to start might be now with an RESP (registered education savings plan), a tax-deferred education savings vehicle used to cover a beneficiary’s tuition, housing, books and other necessities of a post-secondary education.

Why now, you ask? Let’s assume, for example, your newborn baby will attend post-secondary school in 18 years. By that time, a four-year undergrad degree will, at an inflation rate of 10 per cent, cost an estimated $116,000 (tuition only), according to Robert Abboud, an Ottawa-based certified financial planner and author of No Regrets: A Common Sense Guide To Achieving And Affording Your Life Goals.

“(The price is) horrendous if you want to send your child to school,” says Abboud. “Most young parents, probably because they already have a lot of other debts to pay down, won’t start saving for their child’s education until their 30s.”

There are ways to counter that staggering bill, Abboud says, such as maxing out education grants. Encouraging your kid to stay home if there’s a local institution that has what he or she wants to pursue is a big saver. A part-time or summer job for your earnest student teaches them the value of a dollar and eases your burden.

Beyond that, Abboud advises you put away anything you can, as soon as you can. If you saved $200 per month from the year your child was born, assuming the inflation rate stays at 10 per cent and your RESP investment return is 8 per cent, that monthly contribution for 18 years “works like a charm.”

Expensive, sure, but helping any way one could may go a long way toward a parent’s peace of mind when it comes to helping out the next generation. Abboud says post-boomer parents are more aware of how welcome financial help is for the starving student.

“There’s a guilt attached to RESPs,” says Abboud. “Because our generation’s parents only helped us a little with our education, we learned a very good lesson about how expensive school can be.”

Robert Abboud’s RESP calculator

Assuming your child’s current age is less than a year, and you expect them to attend post-secondary school at age 18, there are some costs to consider:

  • Expected costs of your child’s education: $116,735

  • Savings required at the start of school (1st year): $103,442

  • Total projected value of RESP (if $200 monthly over 216 months with annual rate return of 8 per cent): $93,130

  • Total projected value of government grants to assist you: $23,892

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