As a parent, you will surely be bogged down by worry regarding your child’s future. You may also aim to give them the best possible chance to succeed. And the best way of doing so is by ensuring they get the right education.

However, the cost of education keeps climbing higher and the burden of student loans seems to be getting inevitable. That is why saving for your child’s education is more important than ever.

So, how can you ensure that your child can graduate with little to no debt? RESP may be the answer you seek

What is RESP?

RESP or a Registered Education Savings Plan is an investment account that is designed to help you save for your child’s education. This plan allows you to invest in an account to grow tax-free. This means that there are no taxes on capital gains, interest, and dividend payments.

How does RESP work?

The sponsor of the plan, usually the child’s parent or guardian, makes a contribution to the RESP. The government then pays an additional 20% of that, up to a maximum contribution of $2,500 each year. That’s $500 every year if you contribute the maximum. This is known as the Canadian Education Savings Grant (CESG) and it goes straight into the beneficiary’s RESP and is yours to invest as you please. However, please note that the lifetime contribution limit is capped at $50,000 per beneficiary from all RESPs combined.

When your child starts receiving payments from the RESP for school, the money will be taxed at their income. This means that their tax bill will below.

Can RESP help?

Whatever you may contribute to your savings and receive in government grants may end up as nothing more than a drop in a bucket if it cannot keep pace with the rapidly growing cost of tuition. However, there are several online calculators that can help you crunch the numbers.

You can use the calculators by starting off with a base value and the projected rise in tuition costs provided. The calculator assumes that your child will be living at home, so any extra costs for boarding and household expenses are not projected. The results these calculators offer can help you plan your financial savings.

It all boils down to this: If you start early, you have a chance of saving more than your child might actually need to fund their full education.

If you are starting much later or when your child is already going away to school, there is still no need to panic. An RESP can help you still save funds that can help prepare for tuition expenses and limit the need for student loans.