Making the most of holiday spending: how to gift education savings

‘Tis the season of giving once again. The holiday season is upon us, along with full social calendars, long checkout lines, and even longer shopping lists.

Sticking to a budget throughout the holiday season can be challenging,but sometimes by this point in the year we find we’ve got some extra money. Be it from savvy saving strategies, a holiday bonus or two at work, or cash gifts received as December celebrations unfold, a little extra money can open up some opportunities for giving.

When we have a little more padding in the budget, it’s always tempting to spend that extra money on special gifts or activities. I can’t help but talk about warm beach vacations or ski trips out west, a newer TV or surprising the kids with the latest gaming device.

There are so many things our family passes up throughout they ear to stay on budget, that it’s easy to get caught up in lavish gift giving when we have the means. All of a sudden a few extra dinners out on the town or tickets for the kids to see a holiday concert or show are within reach.

But there’s another option for stretching any extra money you might have at year-end with a different kind of meaningful gift: investing in your child’s future education.

RESPs – the gift of education

Opening or contributing to an RESP (Registered Education Savings Plan) makes it easy to give the gift of higher education – while also making the most from every dollar you invest.

RESPs are the only education savings accounts designed for the express purpose of funding post-secondary education. You don’t pay tax on your investment earnings as long as they stay in the RESP, and they give you access to a federal government matching grant program. Depending on where you live, you may also be eligible to receive additional provincial grants and incentives.

And gifting an RESP to your child means you’re giving them a wider range of options for education and career paths after high school, as well as the chance to graduate debt-free. Considering the current and future potential costs of post-secondary education in Canada, RESPs provide a great strategy for parents to ensure your child’s funds for tuition will be there when needed.

Opening an RESP

So in lieu of an extra gift under the tree for your children, or even for your partner or spouse, think about using that extra money to get a head start on your child’s education savings.

It’s really easy to open an RESP account. Companies like CST Consultants Inc. (CST) specialize in RESPs and are dedicated to helping families create their post-secondary education savings goals and plans. This is their area of expertise, so you’ll have access to knowledgeable professionals and reliable savings strategies throughout the life of your investment.

So for the same cost of a dinner for your family at a restaurant, or a brand new toy or game for the kids, you can instead start building up your child’s funds for a college or university education. And it can still be fun for the recipient to open.

Consider making a handmade coupon for your kids to be cashed in the year they will graduate high school. Tuck their coupon into a graduation mortar board cap with a tassel, or print them a mock university diploma or degree with their name on it and the year they might graduate – something fun your child can hang onto to remind them you’re investing in their future.

Top up your RESP

If you already have existing RESPs, dedicating some or all of your extra holiday cash into your education savings accounts is another great holiday gift idea.

You can make additional contributions into your RESP account at any time. And every little extra amount helps: the longer you save, and the more you invest, the more you can accumulate.

Plus, the bonus of a year-end contribution is that you can ensure you are maxing your eligible matching government grants yearly. In general, you should aim to contribute$2,500 per year by year end, so that for every dollar you have deposited to your RESP, the federal government will add a 20 per cent matching Canada Education Savings Grant (CESG) – up to $500 per child each year to a lifetime maximum of $7,200 – to boost your savings. 

And even if you can’t maximize your contributions to take full advantage of the CESG by December 31, the government allows you to catch up in future years, but you will only be able to claim two years’ worth of grants, or a maximum of $1,000 per year, at a time.

Pay it forward

Of course, the gift of education doesn’t have to be limited to your own kids. If you’ve got nieces and nephews, godchildren, grand children or new parents in your life, why not open or contribute to an RESP on their behalf?

There’s nothing parents appreciate more than a little help securing a future for their kids – it’s a generous and thoughtful way to give to the ones we love this holiday season.

In the end, no matter how you choose to gift a child more options for debt-free post-secondary education, it will be appreciated. The security that comes with knowing there is a plan in place to help fund their options after high school is most certainly a holiday gift that keeps on giving.

Carmen Kinniburgh

Carmen Kinniburgh is a freelance writer and editor exploring topics and ideas about parenting and families, Canadian science and research, health and medicine, as well as travel and lifestyle. Born and raised in Alberta, Carmen has also lived in Southern Ontario and Manitoba, where she worked in professional communications for a university and a national health charity. Currently living in Thunder Bay, Ontario, she gets all her best ideas and insights for Parentwise from her own three delightfully precocious children.

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