As a parent, there's nothing more important than giving your child a great start in life - and education is a big part of that. One of the smartest ways to set your child up for future success is by investing in a Registered Education Savings Plan (RESP). Whether you're planning for their university years or dreaming of a college degree, a RESP can make those goals a reality.

But why exactly should you invest in an RESP? Let's dive in and explore the many benefits of this powerful savings tool.

Understanding What a RESP is

RESPs are Canadian government-sponsored savings plans designed to help save for a child's post-secondary education.

They are unique because contributions grow tax-free until withdrawal. Other benefits include access to government grants and flexibility in fund usage. Funds can be used for various educational expenses, including tuition, books, and housing. This makes them a powerful savings vehicle for education.

The Power of Government Grants

One of the most attractive features of a RESP is the access to government grants. The Canada Education Savings Grant (CESG) is a prime example of this advantage.

The CESG matches 20% of your annual RESP contributions, up to $500 per year. Over a lifetime, that can add up to $7,200 in free government money to help with tuition and other educational costs. Additionally, lower-income families may qualify for the Canada Learning Bond (CLB), which provides further financial assistance of up to $2,000.

These grants can significantly boost your savings, making a RESP one of the best ways to fund education for your children. The earlier you start, the more time your money (and the grants) have to grow. While it may seem like a small contribution at first, when you factor in the grants and the time to grow, it can add up to a large chunk of change when it's time for your child to head to school.

RESP vs. Regular Savings Account

There are many reasons why you should choose a RESP over other savings tools like a regular savings account.

• Government contributions: As mentioned, the government matches a portion of your contributions, which is not something you get with other savings plans.

• Compounding growth: Like any investment, the earlier you start contributing, the more time your money has to grow. Even small monthly contributions can grow significantly over the years, thanks to the power of compounding interest.

• Tax-deferred growth: Investment earnings within a RESP grow tax free. That means no taxes on interest or dividends until you withdraw the funds to pay for school. And when the funds are withdrawn, they're taxed in your child's name, which is usually at a much lower rate than the parent's tax rate.

• Contributions from family and friends: A RESP is open for contributions from anyone - grandparents, aunts, uncles, friends - anyone who wants to help support your child's education.

• Diverse investment options: You can choose from guaranteed investment certificates (GICs), stocks, bonds, mutual funds and more - whatever suits your investment risk tolerance and goals.

The reality of Rising Education Costs

It's no secret that the cost of education is on the rise. According to estimates based on historical trends and current data, tuition fees for post-secondary education in Canada are projected to hit over $17,000 annually by 2035¹. This doesn't include living expenses, books, or just everyday expenses.

This is why it's important to start saving for your child's education early. The earlier you invest in a RESP, the more time for your money - and government grants - to grow. And every bit will help when it comes to covering the increasing costs of higher education.

Getting Started with a RESP

Starting a RESP is easier than you might think. Here's how you can take the first step in setting up a plan that works for your family:

• Connect with a financial advisor: They can guide you through the process, helping you compare different RESP options and ensure you pick the one that best suits your family's needs.

• Choose the right plan: You have the choice of selecting from three main types of RESP plans: individual, family, or group. A family plan is beneficial if you have more than one child, allowing you to pool contributions for all of them into a single account.

• Set a contribution plan: Your financial advisor can help you develop a sustainable contribution strategy. Even if you start small, the key is consistency. And remember, the government will match your contributions by 20%, up to $500 per year.

• Track your progress: Your advisor will check in with you periodically and you can adjust as your child's education approach gets closer.

The Gift of Education

Investing in a RESP is more than just saving for school - it's about setting your child up for a future without the weight of financial stress. By planning ahead and starting early, you can give your child the gift of education and open doors to endless opportunities. Whether you're a new parent or already navigating the journey of raising a family, a RESP is an effective way to prepare for their post-secondary education.

¹ The projected tuition costs are based on analysis of historical trends in tuition fees, with data from Statistics Canada and other sources that track educational costs over time. See detailed reports on Canadian tuition fees here.