The Canadian Foundation for Economic Education and The Building Futures Network present

Strategies to Expand Your Savings for Post-Secondary Education and Training

Begin to Save Early Post-secondary education and training are expensive, and the reality is that those costs continue to escalate. Beginning to save early for these expenses will truly benefit. Two examples are: 1. How one couple saved $15, How compound interest can double your money

They open a Registered Education Savings Plan (RESP) for Hayley right after she is born. The government gives them a $500 Canada Learning Bond (CLB). They also get another $100 each year for up to 15 years. They put $20 into Hayleys RESP each month until she turns 18. The Canada Education Savings Grant (CESG) adds $96 to Hayleys RESP – 40¢ for every dollar they save. If their RESP earns 5% interest each year, they will have more than $15,000 to help pay for her education. 1. One couple saved $15,000

2. The Value of Compound Interest In terms of planning your savings to cover the costs of post-secondary education, one rule to know is … The Rule of 72 Divide the number 72 by the interest rate you earn each year and thats the number of years it will take to double your money. Example: $5,000 invested at 6% per year will take 12 years (72 divided by 6) to double to $10,000

Programs and Options for Saving for Post- Secondary Education 1. Registered Education Savings Plan 2. Canada Education Savings Grant 3. Canada Learning Bond 4. Informal In-Trust Account and Living Trust 5. Juvenile Life Insurance 6. Other investments that grow money through interest, dividends, or profit

1. Registered Education Savings Plan (RESP) -a special savings account that can help you, your family, or your friends save early for your childs education after high school. -savings for education grows tax free until the child enrols in education after high school.

How to Open an RESP: 1.Get a Social Insurance Number (SIN) for yourself and the person named in the RESP. 2. Apply to the Canada Revenue Agency for The Canada Child Tax Benefit if your family net income is $74,357 or less. 3. Decide on the provider and type of RESP. 4. Put some money in the RESP.

Types of Plans: Family Plan – for a child(ren) related to you Individual Plan – beneficiary not necessarily related to you Group Plan – administered by a group leader and requires regular payments

may be a good choice if: - you want all or any of the children named in the plan to be able to use the money -you want to decide how to invest the money either on your own or with an advisers help - you dont necessarily want to make regular monthly payments A Family Plan

may be a good choice if: - you want to save for a child who is not related to you - you want to decide how to invest the money either by yourself or with the help of an adviser - you dont necessarily want to make regular payments An Individual Plan

may be a good choice if: - you can make regular payments into the plan - you prefer to have someone else decide how to invest the money for you - you are fairly sure that the child you are investing for will continue after high school A Group Plan

As soon as the child named in the plan is enrolled in a qualifying educational program he or she can start receiving payments from the RESP called educational assistance payments (EAP). Using Your RESP:

If the beneficiary does not continue after high school you may be able to: - wait for a period – he or she may continue later - transfer the money to an RRSP - withdraw your personal savings, tax free

2. Canada Education Savings Grant (CESG) -a grant offered by the Government of Canada to encourage parents, family, and friends to save for a childs education after high school - paid directly into the RESP of the child

Eligibility for the CESG: Children up to and including age 17 provided: - the child is a Canadian resident - the child has a valid Social Insurance Number - the child is named as the beneficiary of the RESP - money has been put in the RESP

The Amount of the CESG: On the first $500 you save in your childs RESP the CESG will give you: - 40 cents per dollar if your net family income is $37,178 or less -30 cents per dollar if your net family income is between $37,178 and $74, cents per dollar if your net family is more than $74,357 Regardless of income, when you save more than $500, CESG pays 20 cents for every extra dollar up to $2,500.

How to Get the CESG: 1. Apply for a Social Insurance Number for your child. 2. If your family net income is below $74,357, apply for the Canada Child Tax Benefit (CCTB). 3. Choose the RESP provider. 4. Open an RESP for the child. 5. Put money in the RESP. 6. Ask your provider to apply for the CESG.

Lifetime Limit on CESG: - maximum amount is $7,200 - lifetime means from the time the child was born until the year in which the child turns 17

3. Canada Learning Bond (CLB) -a Government of Canada grant to help modest income families start saving early for their childs education after high school. - goes directly into an RESP for which the child is named as beneficiary.

Eligibility for the CLB: - your child was born after December 31, your monthly Canada Child Tax Benefit includes the National Child Benefit Supplement

The Amount of the CLB: - government will add to a childs RESP by making a first payment of $500 and $100 a year after that for up to 15 years as long as they are receiving the National Child Benefit supplement - the total CLB available could be $2,000

4. Trusts Informal In-Trust Account: - set up at your financial institution - open the account and identify the child - money held in trust for them until 18 - you decide how much, when, how often money is deposited - you decide who will manage the account - no taxes are paid because you already paid taxes on the money – just on interest made.

Living Trusts: - two types – Revocable and Irrevocable Revocable – trust can be closed and money withdrawn Irrevocable – money cannot be withdrawn - both are complex and require legal assistance

5. Juvenile Life Insurance - permanent life insurance purchased for the child - some of the money builds up cash value - child can take cash value out or borrow against it for education after high school - if the child borrows against it, there is a lower rate of interest on the loan - the money you make investing is tax sheltered

6. Other Investments that Grow Money: 1. Investments that pay INTEREST 2. Investments that pay DIVIDENDS. 3. Investments that pay CAPITAL GAINS

1. Investments that pay interest: - include such things as GICs and bank accounts - the money is safe but grows more slowly - the money is accessible and the growth known - no guesswork or risk

2. Investments that pay dividends: - include such things as some stocks - regular income depending on how the stock did - if outside an RRSP, there are taxes but at a lower rate than the tax on interest and at a higher rate than the tax on capital gains

3. Investments that pay capital gains: - these include stocks, bonds, mutual funds - make sense for long-term investment - money tends to grow faster but there are no guarantees – money could be lost - if outside an RRSP, the tax rates are a lot less

Presented by The Canadian Foundation for Economic Education and The Building Futures Network