You’re not the only parent wondering whether it’s better to contribute to your Registered Retirement Savings Plan (RRSP) or your youngest child’s Registered Education Savings Plan (RESP). What if you don’t have to sacrifice one for the other?
Can you save for your children’s education and plan for your retirement at the same time? Absolutely! Here are two strategies that will allow you to combine your savings goals for both these life projects and get the most out of your investment.
Investing in an RESP rather than an RRSP or even a TFSA has several advantages.
Every time you contribute to your RESP, the government chips in too. We kid you not—your child could receive thousands of extra dollars for school! The government will match 30% to 60%2 of the first $2,500 you invest each year. It’s hard to imagine another investment that generates that kind of return!
An RESP is an attractive investment that grows tax-free. When you’re ready to make withdrawals from your RRSP down the road, they’ll be taxable. The money invested in an RESP is returned tax-free to the parent who saved it, while the beneficiary receives educational assistance payments (EAPs). This income is taxable at the beneficiary’s own rate, which will likely be low or zero since they’re still in school!
Opening an RESP with Kaleido comes with the added benefit of family support! Kaleido is there to help parents at every step of their child’s journey. Our clients have unique access5 to exclusive offers and free videos, content, and tools, as well as discounts on family coaching, tutoring and academic support, family finances, and health and wellness. To learn more about this service exclusively for our clients, visit our accompanying services page.
Talk to an education savings professional about our many RESP options.
1. Survey methodology: The CROP survey polled 1,003 Quebecers online from November 4 to 9, 2019.
2. Canada Education Savings Grant (CESG) of 20% to 40%. Based on adjusted family net income. The annual CESG limit is $600, and the lifetime limit per beneficiary is $7,200. The Quebec Education Savings Incentive (QESI) matches 10% to 20% of contributions. Based on adjusted family net income. The annual QESI limit is $300, and the lifetime limit is $3,600 per beneficiary.
3. Canada Learning Bond (CLB) of up to $2,000 per beneficiary for children born to financially eligible families after December 31, 2003. Some conditions apply. Refer to our prospectus.
4. Some conditions and restrictions apply. The promotions, benefits, and other perks of the accompanying services program are subject to change without notice and may not be available in some areas.