How do I save for future for my kids?
It’s simple. You just need to designate a savings account for your kids’ future expenses. You should separate it from your savings account. For instance, when you’re saving for your kids’ future post-secondary education, you can opt for an RESP.
An RESP is a Registered Education Savings Plan that helps parents save for their kids’ higher education. I would advise you to read the Knowledge First Financial reviews to find a reputable RESP provider. This company also offers scholarships opportunities.
An RESP is a government-sponsored program. For that reason, it’s the most reliable way to save for your children’s future education. It also has numerous perks, such as tax-advantaged savings and guaranteed government grants.
When saving money using an RESP, you don’t need to worry about taxes. Your investment will grow tax-free, helping you save hundreds of dollars on taxes. The government will also not tax the interests earned on your investment.
With an RESP, you are also entitled to the Canada Education Savings Grant (CESG). The government will offer you a 20% grant on your contributions up to CA$2,500 per year. The annual CESG limit is CA$500, while the lifetime CESG limit is CA$7,200.
For instance, if you contribute CA$2,000 to your child’s RESP account in a year, you’ll receive a grant worth CA$400. However, if you save CA$5,000, the maximum amount of CESG you can get is CA$500, which is 20% of the CA$2,500 limit.
If you earn a low income, an RESP will be the best way to save for your kids’ education. Plan holders whose net family income is less than CA$47,630 are eligible for an additional CESG of 20% on the first CA$500 contribution. That’s around CA$100.
But if your income falls between CA$47,630 and CA$95,259, as of 2020, you become eligible for a 10% additional CESG on the first CA$500, translating into CA$50. These grants are all free money, and you need to take full advantage of them.
As a responsible parent, you can open an RESP for your children and start saving early. It’s the best gift to give your children. Ensure that you automate your periodic payments to promote consistency and reduce the chances of missing payments.
Finally, you ought to cut back all the unnecessary expenses and channel the savings to your child’s RESP account.