I've noticed lately that time moves faster now than when I was younger. In fact, it seems like yesterday when retirement seemed impossibly far away. Now at an ever increasing pace I suddenly find myself farther from the start of my career than I am from retirement.
At this time of year, there is no shortage of reminders about the importance of planning for retirement by using a Registered Retirement Savings Plan (RRSP). Retirement doesn't worry me -- in large part because many years ago, I began a regular, systematic and disciplined savings plan through my company pension plan and my own RRSP. That places me squarely in the minority based on a recent survey conducted by Leger Marketing for C.S.T. Consultants Inc., the company I work for and an organization that specializes in helping families save for their children's post-secondary education. In fact, the survey found that a surprising 92 per cent of parents with children under the age of 18 were concerned that their retirement savings plan could be derailed.
The biggest reasons for concerns were things like the cost of living or health issues. But one number in particular stood out to me: 29 per cent of parents with children under the age of 18 are concerned that their own retirement could be derailed by their children's post-secondary education costs. Trust me when I say I know all about that: I have seven children. Three of those children are in university now, and the others are coming up quickly. I can tell you from personal experience that the costs of post-secondary education today are significant -- and they're only going to keep rising.
So here's a thought. One of the best ways to make sure that your retirement is not derailed by your children's post-secondary education is to also make sure that you are planning financially for the cost of that education. In my opinion, the best way to do that is by using a Registered Education Saving Plan (RESP). Not only do you get the benefit of tax-deferred growth on your investment, but you also have a powerful incentive in the form of the Canada Education Savings Grant -- money from the Government of Canada -- that will match your own RESP savings with a 20 per cent grant. There are a number of additional incentives available for lower income families, and also in certain provinces. These all make the RESP an important tool not only to help set your child on the path to success, but also to safeguard your own retirement planning.
As a father of seven, I understand the reality that parents today are constantly juggling multiple priorities, including how best to use their limited financial resources. Here are some tips to help you make the most of your RESP:
1. Start early and save regularly
The earlier your start, the more time you have to allow compound growth to work for you. While post-secondary education may not be top of mind the week after your baby is born, there is no better time to start saving for that future tuition bill. By making smaller, monthly contributions into your RESP, you take away the shock factor and it just becomes a regular part of your monthly budget.
2. Involve your children in the process
Make sure your children know you are saving for their higher education and encourage them to do the same. If they have a part-time job, challenge them to set aside some of their earnings into a savings account (or even contribute into their RESP). Not only do they learn more about the importance of saving, but they also will be in a better financial position when the time comes to go to university or college.
3. Take advantage of all the government incentives
Make sure you know what you are eligible for based on where you live and your level of income. C.S.T. Consultants provides information to help you determine this on our website. Ensure that your RESP provider will help you get all of the grants you are entitled to, and contribute as much as you comfortably can in order to maximize the amount of Canada Education Savings Grants (CESGs) you receive.
4. Make sure you are comfortable with how your money is being invested
There are many different ways to invest the money inside your RESP. As a parent, my rule was simple: I did not want to take any significant risks with the money I was saving for my children's learning. I was satisfied with receiving the 20 per cent government grant, and a modest return on my money. For me, it was more important that the money be there when I needed it. Consider for yourself how much risk you are prepared to take with your investments, and then make sure that the RESP you are saving in delivers on that.
There is no shortage of things that have the potential to derail your future retirement plans. And while you might not be able to control the future cost of living, through careful planning and saving, you can make sure that your child's post-secondary education is one thing you don't have to worry about.
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