It may seem like a long way away but before you know it, your little one will be off to school and then off down one of life’s many paths. You may wonder how you can possibly predict what your child may choose to do and be nervous about saving money for an event so far in the future. The reality is that if your child pursues post secondary education it will be a large expense and it is easier to begin saving now. The other benefits include the Canada Education Savings Program (CESG) grant (free money!) and a reduced need for student loans.

The registered education savings plan is administered by the Canadian government and is quite flexible in terms of qualifying programs when it comes time to invest in post secondary education. If all else fails, the funds in the plan can be withdrawn subject to certain but not onerous tax implications.

Here is some quick info:
There is no annual limit for contributions but a lifetime maximum of $50,000
The CESG paid is calculated on your contributions – 20% to a maximum of $500 annually and $7,200 lifetime per beneficiary (note that if unused contribution room is made, up to $1,000 CESG per year may be paid)
You may be eligible for a higher grant based on your household net income
Tip: To maximize the payment of the CESG, contribute $2,500 per year. 20% of $2,500 = $500.

You may wonder where you will find $2,500 per year to put in an RESP. I use the UCCB of $100 per month which adds up to $1,200 per year – a good start. Grandparents may be willing to help out and tax returns are other resources.

As to where to invest it…check with your banker for options. Depending on your risk tolerance, the time line and investment knowledge you will have several choices. To make it low maintenance, set up a monthly purchase plan. The CESG will be paid in automatically.

For detailed information:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/menu-eng.html