Five education savings myths
Did you know that Registered Education Savings Plans (RESPs) have been around since the 1970s? Although putting money aside for education is a well-established concept in the modern world, not everyone knows about education savings strictly speaking.
In 50 years, people have had plenty of time to tell each other lots of stories without knowing if they were really true. The reality is that thousands of dollars in grants are within your reach with education savings. You don’t want to miss out on these important benefits because of a few mistaken beliefs, do you?
Myth #1: Education is free in Quebec
Calling primary and secondary education “free” is already a bit of an overstatement, but the cost of post-secondary education can be a shock! Between tuition, computer, books, transportation and unexpected expenses, you’ll also need to plan for room and board if your child leaves the family home. These expenses can average $108,9001 if your child lives away from home while pursuing a bachelor’s degree.
Myth #2: Only affluent families can afford to save for education
On the contrary, government grants for education savings can be even more advantageous for lower-income families. For example, the Canada Learning Bond (CLB) allows eligible families with more limited incomes to receive up to $2,000.2 If you qualify, simply open an RESP for your child (born after December 31, 2003) – you don’t even have to contribute.
The RESP is indeed available to everyone, regardless of your income.
Myth # 3: My TFSA or RRSP is a better deal than an RESP
That would be quite a surprise! RESPs offer unique advantages that TFSAs and RRSPs do not. Speaking of which, federal and provincial grants can increase your savings by 30% to 60% in Quebec.3 In addition to the CLB, the Canada Education Savings Grant (CESG) can provide up to $7,200 per beneficiary, as well as $3,600 for the Quebec Education Savings Incentive (QESI).4
Furthermore, although your contributions are not tax-deductible, the RESP grows tax-free.5 Who can beat that?
Myth #4: I’ll lose it all if my child doesn’t go to university
First of all, your capital belongs to you, no matter what child decides to do after high school. Secondly, eligible programs are not limited to those offered by universities. There are more than 8,000 options, including regular and technical college programs (DEC) and vocational programs (DEP).6
Finally, if your child does not pursue a post-secondary education, you can still:
- transfer the funds to another child’s RESP;
- transfer the sums to your retirement savings;
- use the accumulated capital and interest to support your young person in another project, such as buying their first home!
What’s more, your RESP has a 35-year lifespan, giving your son or daughter plenty of time to explore the world before deciding on their future. Please refer to our prospectus for the terms and conditions applicable to each of these options.
Myth #5: RESPs can only be used to pay tuition fees
In fact, once the money is in your pocket, you can also use it to pay for school supplies, a computer, groceries, rent and even a car if your child needs one to get to class. As long as it’s a reasonable educational expense, it’s good!
In conclusion, don’t underestimate the power of the RESP! And by covering your child’s post-secondary education expenses, you’ll be reducing their debt load at the same time. Open an Education Savings Account to take advantage of available grants today. You can then contribute at your own pace and within your means, thanks to the Kaleido Individual RESP.
Ready to finance your child’s future education?
Open an RESP to take advantage of generous grants as soon as possible. With Kaleido’s individual IDEO+ plans, you can contribute at your own pace and according to your means.
Legal notes
1. Approximate average cost (adjusted for inflation) of education in Quebec in 18 years, according to the Ministère de l’Éducation et de l’Enseignement supérieur, the Ministère de la Famille, Statistics Canada and CMHC. This includes tuition fees, living expenses, accommodation and food costs (if applicable). Costs can vary depending on the program of study and its duration, the city, the educational institution and many other factors.
2. Canada Education Savings Grant (CESG) from 20% to 40% and Quebec Education Savings Incentive (QESI) from 10% to 20%. Based on adjusted family net income. The maximum annual CESG payment is $600 and the maximum annual QESI payment is $300. The lifetime maximum per beneficiary is $7,200 for CESGs and $3,600 for QESIs. Canada Learning Bond (CLB) of up to $2,000 per beneficiary for a child born after December 31, 2003, whose family is financially eligible. Certain conditions apply. See our prospectus at kaleido.ca.
3. Canada Education Savings Grant (CESG) from 20 to 40%. Based on adjusted family net income. Quebec Education Savings Incentive (QESI) of 10% to 20%. Based on adjusted family net income. Certain conditions apply. See our prospectus at kaleido.ca.
4. Canada Education Savings Grant (CESG) from 20% to 40% and Quebec Education Savings Incentive (QESI) from 10% to 20%. Based on adjusted family net income. The maximum annual CESG payment is $600 and the maximum annual QESI payment is $300. The lifetime maximum per beneficiary is $7,200 for CESGs and $3,600 for QESIs. Canada Learning Bond (CLB) of up to $2,000 per beneficiary for a child born after December 31, 2003, whose family is financially eligible. Certain conditions apply. See our prospectus at kaleido.ca.
5. Under current legislation, Education Assistance Payment (EAP) amounts paid to or on behalf of the beneficiary are taxable income for the beneficiary, to be included in their income tax return for the year in which the EAPs were paid.
6. Certain conditions apply. See eligible post-secondary programs in our prospectus at kaleido.ca.
