The gift of Education

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This time of year grandparents will be asking themselves what to get their grandchildren for Christmas.  Trying to figure out what the kids are into these days, we pour into the department stores in search for the perfect toy.  These gifts provide joy on Christmas morning and in the months that follow, but are usually short lived and eventually outgrown.

It’s a bit unconventional, but if you have grandchildren in your life, you may want to consider giving the gift of education this Christmas.  Planning for their future education isn’t as ‘visible’ to a child as a doll or video game, but it is a gift, that when they are old enough to understand and appreciate it, they will thank you for in the long run.

The concept isn’t new.  Many grandparents would buy Canada Savings Bonds periodically on special occasions for their grandchildren in hopes of encouraging the value of saving and setting up a nest egg for their future. 

In a world where children have more toys and gadgets than they can count, sometimes we search for something more meaningful.  With the rising cost of education, most parents could use some help to save for college and university for their children.  If you have special children in your life and you are looking for a new way to contribute to their future, you may wish to consider putting this gift towards a Registered Education Savings Plan (RESP).

An RESP is a special savings account to help you save for education that is registered by the Government of Canada and grows tax free until the person named in the RESP (referred to as the beneficiary) enrolls in studies after high school.

One of the greatest benefits of an RESP is when you make contributions, the Government of Canada adds money to your RESP through incentives like the Canada Education Savings Grant and the Canada Learning Bond.  You have the opportunity to grow your money significantly with grant money alone.

There are different rules surrounding contributions, family income and carry-forwards but in a nutshell, when you open an RESP you can expect:

  • The basic Canada Education Savings Grant (CESG) will be 20% on the first $2500 per year.  In other words, for every $10 you put in, the government will put in $2
  • You may be eligible for additional CESG or Learning Bond depending on family income
  • Per beneficiary, there is a lifetime maximum contribution limit of $50,000 (maximum CESG of $7,200 over the life of the plan)
  • You may open a Family RESP which names all siblings as beneficiaries.  The RESP funds can pass between siblings so in the event one doesn’t attend school, another can use the funds
  • You can open an RESP at most financial institutions and choose from a variety of investments
  • The child must live in Canada and have a Social Insurance Number (SIN).
  • If you are a grandparent you should check with the parents to see if they have an RESP set up already.  From there, you can decide if you need to set up a new RESP or contribute to an existing RESP, and coordinate your contributions to maximize your available grant.

The gift of education can last beyond your lifetime.  What better gift can a grandparent give?  It is something that makes a difference in a child’s future.   It is the ability to provide something meaningful and is something to be remembered by.  Each year when they take money out of their RESP for their education, they will be grateful the money is there, they will be thankful they don’t have a loan, and they will appreciate warmly your living legacy.  


Link to column as it appeared in Elgin This Month December 2012 edition (page 6)


Stephanie Farrow, B.A., CFP.,  Stephanie has over 20 years experience in the financial services industry, a diploma in Financial Planning from the Canadian Institute of Financial Planning, and Certified Financial Planner designation.  Stephanie has been writing a financial planning column for the local business magazine Elgin This Month since 2010 and hosts our Farrow Financial Blog and Twitter @farrowfinancial.  Stephanie and her husband Ken Farrow own Farrow Financial Services Inc., are busy raising three young children and actively involved in the community. Our Farrow Financial Services Team.