In 2024, the average Registered Education Savings Plan (RESP) balance for Canadian families is around $30,000. However, this can vary depending on how early the plan was started and contributions made. With government grants and investment growth, many families aim to cover a chunk of their kids’ future education costs. Yet, some balances can be higher depending on saving habits and market performance. Depending on where you fall, is it really enough?
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A Good Start
While $30,000 in an RESP is a great start, it may not fully cover your child’s post-secondary education, especially for a four-year university program. Tuition can range from $6,000 to $10,000 per year, depending on the program and province. This doesn’t include books, supplies, or living expenses. If your child stays at home, costs will stretch further, but moving away adds rent and food expenses.
That said, any amount helps. Having an RESP means giving your child a solid financial boost. With the government adding grants to your contributions, your money grows faster than in a regular savings account. Although you might need to supplement with other savings or scholarships, you’re already ahead by planning for your child’s future education. Every little bit counts!
Bump It Up
To increase your RESP savings, consider making small, consistent contributions over time. You don’t need to contribute large sums all at once; setting up automatic transfers monthly can make a significant difference. Don’t forget about government grants! The Canada Education Savings Grant (CESG) matches 20% of your annual contributions up to $500 a year. Contributing at least $2,500 annually ensures you maximize this free money.
Investing wisely within the RESP can also boost your balance. RESPs allow for various investment options like mutual funds, exchange-traded funds (ETFs), or bonds, depending on your risk tolerance and timeline. Starting early lets you take advantage of compound interest and market growth, leading to a bigger balance when tuition bills arrive. Remember to review your investments regularly, especially as your child approaches school age!
Consider This ETF
Investing in an ETF like the BMO S&P/TSX Capped Composite Index ETF (TSX) can be a smart move for growing your RESP. It provides exposure to a wide range of Canadian companies across different sectors. Instead of picking individual stocks, you get a diversified portfolio, reducing risk. As these companies grow and the Canadian economy strengthens, your investment in ZCN can also grow.
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Moreover, ZCN is a cost-effective option. ETFs typically have lower management fees compared to mutual funds, allowing more of your money to stay invested. Since ZCN mirrors the S&P/TSX Capped Composite Index, which has shown long-term growth, holding it in your RESP sets you up for steady growth, boosting your balance by the time your child heads to college or university!