Funded by the Government of Canada
through the Canada Education Savings
Program
Our goal is to help families by providing clear and
useful information about saving for your childs’
education after highschool (college/university/trade
school etc.)
We hope that families will feel more confident in
their understanding of Registered Education
Savings Plans’s (RESPs) and the government grant
and bond (free money!!!!).
Future trends in educational needs and
work demands
The Fact Is…..
The work world is changing and
there are fewer and fewer jobs
today in Canada that don’t require
some continuing education after
high school.
Those who have a trade, college or
university degree will have a much
better chance of finding a full time
job and getting higher pay.
Future Trend in
Educational Demands
Post Secondary
Education: How much
will it Cost?
59% of Canadians under-estimate the future cost
of Post Secondary Education.
By 2019: According to Statistics Canada, a fouryear univesity degree will cost about $74,000* and
a three-year college diploma will total $45,000*.
(*this includes tuition, books and living expenses)
Cost-Benefit
University graduates on average make $27,200 more
per year (2005 figure) than high school graduates.
By not going to university the cost saved (from
tuition and lost wages) with interest for 35 years
= $441,300
Graduating from university, potentially $27,200 more
per year is made and if saved with interest for 35
years = $2,455,900
Start Saving Early
While the costs of post-secondary schooling
seems high, there are ways to help plan ahead
and save some of the money that may be
needed.
Every little bit will help so your kids won’t have to
start out their adult lives with a big student debt.
It is important that your child knows that
there is an opportunity to continue
education after high school if they want.
And it is not just about making more
money, it is also about personal
development, choices and opportunities.
Registered Education
Savings Plan (RESP):
Questions to Consider
•
•
•
•
•
•
What is it?
Why open one?
Who can open an RESP?
When should you open an RESP?
Where can you open an RESP?
What do you need to do to open
an RESP?
• Do you need to deposit a
minimum amount of money into
an RESP?
Registered Education
Savings Plan (RESP)
….continued
• How much can you put into an RESP?
• How long can an RESP account stay open?
• How often do you have to put money into an
RESP?
• Can more than 1 RESP be opened for a child?
• Can you open an RESP for yourself?
• How is an RESP taxed?
Registered Education
Savings Plan (RESP)
….continued
• How is an RESP taxed if a child decides not to
continue education after high school?
• Does having a RESP account with savings effect
Work Benefits or Disability Support Payments?
• How do you get the money out to use for PSE or
training?
• What happens if one parent opens the RESP and
then there is a divorce?
Federal Government Programs
Federal Government
Programs
There are two Federal Government PSE savings
incentive programs:
• The Canada Education Savings Grant (CESG) and
the Additional CESG
• The Canada Learning Bond
Canada Education
Savings Grant CESG
• Who qualifies?
– Anyone up to 17 yrs of age that has savings in
an RESP
• How much is the grant?
– 20% added to a RESP contribution (up to
$1000 grant maximum per year)
Additional CESG
– If the net family income is below $40,970
additional 20% will be added to the first $500
of contributions (for a max of $100 grant per
year)
$7,200 is the maximum CESG and additional
CESG grant an individual can recieve
CESG + Additional
Net family
Income
Contribution
($ family
adds)
CESG
adds
CESG+
adds
Total
$40,970 or
less
$100
$20
$20
$140
$1000
$200
$100
$1300
Above
$40,970 to
$81,941
$100
$20
$10
$130
Above
$81,941
$100
$20
n/a
$120
Canada Learning Bond
(CLB)
• Who qualifies?
– The CLB is available for if families
• receives the National Child Benefit
Supplement (NCBS)
• the child (beneficiary) was born after
December 31, 2003
• An RESP account has been opened however
a deposit into that account is not required to
qualify
How Much is the
Canada Learning
Bond?
• The first bond is $500 plus an additional $25 (to
cover the expense of opening an RESP)
• $100 per year thereafter up to the age of 15 and
a maximum amount of $2,000
RESP Savings
$8,000.00
Total in savings
Savings over 10 years
$7,000.00
$6,000.00
$5,000.00
Family
contributions
Family contributions
CESG
$4,000.00
CLB
$3,000.00
$2,000.00
Total in savings
CESG
CLB
$1,000.00
$0.00
Totals
Contributions
Canada Learning Bond Contributions Only with Annual $100 Deposits
and Compounded Interest (rate at .04)
3500
3000
Dollar Value
2500
2000
1500
1000
500
0
1
2
3
4
5
6
7
8
9
10
11
Years
Bond Only
Cumulative amount (bond & interest)
12
13
14
15
16
RESPs 101
An Introduction to the Types of
Registered Education Savings Plans
Individual Plan
 For 1 person
 The person doesn’t have to be related to you
 There are no age limits
 This RESP could even be for you or another
adult. However, the CESG is only for children
aged 17 or younger
 The CLB is only for children aged 15 or
younger
 Some plan fees may apply
Individual Plan
continued….
 Qualifying educational programs include
apprenticeships, and programs offered at
trade schools, CEGEP, college or university and
foreign studies
 Usually, a qualifying educational program is a
course of study that lasts at least 3 weeks in a
row, with at least 10 hours of instruction or
work each week. A program at a foreign
educational institution must last at least 13
weeks
Individual Plan
continued….
• An Individual Plan may be a good
choice if:
– You want to save for a child
who is or is not related to you
– You want to decide how to
invest the money, either on
your own or with the help of a
financial advisor
– You don’t necessarily want to
make regular monthly
payments
Family Plan
 You can name one or more children as
beneficiaries
 The children must be related to you(your
children, adopted children or grandchildren,
brothers or sisters)
 Must be under 21 years
 Additional CESG payments available only if
children are siblings
 CESG can be used for either child
 CLB can only be used for specific child
 May not require specific monthly payments
 Some plan fees may apply
Group Plan
 You can name only one child in a group plan
 The child doesn’t have to be related to you
 Your savings are combined with those of other
people
 Plans are provided by group plan dealers, who
usually put money in low-risk investments
 Usually, you must make regular payments
into the plan over a certain period of time
 Limited to full time studies, usually a minimum
of 6 months per year and a 2 year program
 Fees apply!!!!!!!
Group Plan
continued….
A group plan may be a good
choice if:
– You can make regular
payments into the RESP
(there is a penalty if you
don’t)
– You prefer to have
someone else decide how
to invest the money for
you
– You are fairly sure that the
child you are saving for will
continue education after
high school
Documents needed
for an RESP
• Social Insurance Number (SIN) for the
parent/legal guardian and one for the child
• Child’s original document (birth certificate/birth
registration)
• A document that confirms that you are the legal
guardian of the child OR authorization from the
primary caregiver for you to open an RESP
account for their child
Who can apply for a
Social Insurance
Number (SIN)?
1. Canadian citizens
2. Newcomers
3. Temporary residents
4. Children under 12 through a parent or legal
guardian
Health Care
Premium
Subsidy
National
Child Benefit
Supplement
Canada
Child Tax
Benefit
Guaranteed
Income
Supplement
Seniors
Benefit
Filing an Income Tax
Return could entitle
you to some or all of
these credits
Income for
Severely
Handicapped
Rent
Subsidy
GST Tax
Credit
Day Care
Subsidy
Banking Terms
Basic Banking Info
It is important to understand some basic banking
concepts and products such as:
 Compound interest
 GIC’s, mutual funds
Compound interest is the concept of adding
interest made back to the principal ($ you
added), so the interest becomes part of the
earnings to make more interest.
However, if it is a loan (not savings), it too may
have interest compounded every month. In this
case, a loan with $100 principal and 10% interest
per month would have a balance of $110 at the
end of the first month so you are now paying
interest on $110.
Guaranteed Investment Certificate’s (GIC’s)
• You may have to invest at least $500
• You agree to keep your money in the GIC for a
certain amount of time, such as six months, one
year, two years, or up to 10 years.
• Most GICs pay you interest. A GIC may pay a
higher interest rate than savings accounts, but
not always.
GIC’s cont…
• In most cases, the longer you agree to put your
money in a GIC, the more interest you will make
• The amount that you originally invested is
guaranteed by the government
• With some GICs, if you need to get your money
back sooner than you agreed, you won’t earn any
interest. In fact, you may have to pay a fee or
penalty
How do Mutual Funds Work?
• When you put your money in a mutual fund it is
added to many other investments, creating a
large pool of money that can be invested.
• The company that runs the mutual fund puts a
professional in charge(fund manager)of investing
the money. This person decides where to invest
the money and also decides when to buy and sell.
Mutual Funds cont…
• You can choose a fund that buys the kinds of
investments that will help you meet your goals.
• Is the most important thing to keep your money
safe? Grow your money? The fund you choose
must be right for you.
How do you make money from a Mutual Fund?
• If the price of your units go up and you sell, you
will make money. If they are have gone down
and you sell, you will lose money.
Tax Free Savings Account
Tax-Free Savings Account (TFSA)
Most banks and credit unions now offer a tax
free savings account where you can deposit up
to $5000 a year and earn interest tax free.
Some differences between RESPs and TFSAs:
1. An RESP is specific to education savings.
2. With a TFSA you don’t pay tax on the money
earned. With an RESP you pay tax when you
take it out but it is taxed at the rate of the
students earnings (or rolled into an RRSP).
3.
You have to close an RESP after 36 years.
There is no time limit for contributing to a
TFSA.
4.
With a TFSA you can name your spouse or
common-law partner as a beneficiary. The
money will roll over to them upon your death.
But with an RESP, if the account is transferred
over taxes still have to be paid.
5.
*The Canada grant and bond program only
applies to RESPs*
Saving Tips
Saving Behaviours
 Attitudes about savings and actual savings
behaviour is strongly related to what kids see is
done in the household (Do you talk about
finances with your children (age appropriately)?
Did your parents talk to you?)
 Financial planning is a key to gaining wealth (in
whatever form)
Learning to Save
Things to consider:
• What is your short term goal (achievable in a
year)?
• What are your long term objectives (next 5
years)?
• What are your strategies to achieve the short
term goal? The long term goal?
• Who can assist you with your planning?
Saving cont…
Important things to know:
• Monthly Income
• Monthly Expenses
• Emergency and unexpected costs
Saving cont…
Taking the steps:
• Calculate your monthly/yearly expenses and
earnings
• Make a budget (plan to set aside $ on a regular
basis to meet your goals)
• Write it all out
• Is it working? Is it doable? Are you
miserable?(review on a regular basis and revise if
necessary).
Sharing Ideas
• Ways to save?
• What motivates you to save?
• What keeps you on track?
• How do you or will you engage your family in
saving?
Tips for Saving
• Save before you spend. Ask your bank to take
money from your pay and put it into a savings
account for you. Even saving small amounts each
month will add up.
• Leave your credit and debit card at home and shop
around for the best prices. Don’t buy the first thing
you see. Plan your purchases to take advantage of
sales.
• Small amounts of cash or loose change are too easy
to spend. Start a money jar for loose change
instead and deposit it in a savings account at the
end of each month.
Tips cont’d…
• Take a set amount of cash out each month, and
put that debit and credit card away!
• Ask a bank for a low cost bank account.
• Stay away from Money Mart etc.! They can
charge up to 150% interest on loans..it’s
robbery.
• Look for ways to save at home. For example,
home-cooked or homemade is usually cheaper
and often better than store-bought.
Tips cont’d…
• Every time you spend money, write it down.
You'll be surprised how much you can save by
getting rid of a few small things.
• Start saving for your children’s education early.
Take advantage of government grants to add to
your savings.
• Know the difference between what you need and
what you want and educate your family about it.
Have fun being the recycle/reuse/save the planet
and save your money family!
Making it Work