When should you start your child’s RESP savings account?

(NC) As a parent, if you’re simply focused on getting through this strange and challenging school year, you’re not alone. But while virtual and modified in-person classes may take up a lot of headspace, neglecting long-term plans is a costly mistake. This includes post-secondary planning.

When it comes to making sure your child has a solid education that doesn’t put them into a ton of debt, starting early with their Registered Education Savings Plan is the best option. Here, Ryan Weiss, vice-president, group customer product and experience, for Canada Life, explains why it’s important to make an RESP a priority now:

1. Access to free money.

Only available through an RESP, the Canadian education savings grant kicks in a 20% matching contribution, equal to $1 for every $5 you put in, for up to $500 a year to a maximum of $7,200.

If money is tight, the Canada Learning Bond, aimed at lower-income families, provides an initial $500 lump sum just for opening an RESP – no contributions needed. You might also qualify for a provincial grant.

2. Every little bit adds up.

If you can save $50 a month in an RESP, over 18 years that equals $10,800. Even $5 a week can quickly add up, especially when the Government of Canada adds money to your savings. The best part? Grants, bonds and any investment income grow tax-free until withdrawn as education payments, which are taxable to the student. Since students often have low or no other income, these payments could even be tax-free.

3. Prepare for an unpredictable future.

COVID-19 is proof that life is uncertain. If you’re banking on your teen working for the summer to save up for school, consider the challenges of this past year that saw many student-level jobs cut. Putting aside money now will help take care of the surprises later.

4. It’s easier than you may think.

Thanks to online banking, you can do anything from paying bills to renewing your mortgage online. Now, when a company offers a Canada Life RESP in their employee benefits plan, those employees can open an RESP as easily as setting up an online bill payment, without touching pen to paper.