Wednesday, November 27, 2013

Registered Education Savings Plan

As someone who'd like her children to get the degree she and her husband never got, I am painfully aware if the high price of college, even when choosing to forgo the more expensive universities and opting for cheaper state colleges. Even the cheaper tuition can eat up a big chunk of a family's budget, let alone the more expensive, prestigious, and higher quality schools.
Because tuition is so expensive, most people cannot afford to pay it monthly on top of all their other expenses, so they end up taking out big loans with high interest, which increases the cost of education tremendously, and then they or their children end up paying it off for the next many years.
There are, however, alternatives to going into debt to pay for education, even without a sky high monthly salary.
How is this? By saying up for the education costs even before they're relevant, using Registered Education Savings Plan, or an RESP. This allows you to set aside money tax free, and even accrue interest, as the government provides grants to help increase people's savings in an RESP.

When is the best time to start saving for your children's education? Now. With a few caveats. The younger your children are, the more time you have to save up for their education, which allows you to put in less each month and still save up a sizable sum in the long run.
If you have debts you are currently paying off, it is wisest to use any extra cash you have to first pay off the debts as quickly as possible, and only then start adding to the savings account, as you're likely to be paying more in interest in the debt than you'd be making in interest in the savings account, hurting yourself financially.

If you want to build a savings account and have no spare change to deposit into the account, see where you can cut back in your finances to free up enough cash to be able to make deposits regularly. Birthday gifts and other money that the kids earn can also be sources of money for the account, though you must decide if you want your children to be paying for their education, or if you feel it should be entirely the parents' responsibility.

See my disclaimer.

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