Saving for an Education

It may seem needless to say, but it’s cheaper to start earlier; for whatever you’re saving for starting sooner allows you to put a smaller amount aside on a regular basis and that sum will earn more interest over its lifetime.  In the case of education savings you have some extra options.  Take the CESG for example; what is the CESG you ask?  The Canada Education Savings Grant, of course.  This is a terrific program that will beef up your education savings.  The CESG will add 20% to your RESP contributions, up to a yearly maximum of

$500.00 and a lifetime maximum of $7,200.00.  You won’t get that kind of investment return outside of a shady, ponzi-esque scheme; to put it another way, if you contributed any amount of money to an RESP and earned 0% on the investment, you would STILL have earned 20%!
Now let’s try something interesting; let’s say you want to start early…  Really early; you can take advantage of the UCCB, the Universal Child Care Benefit.  The UCCB is available to everyone with children and pays $100.00 per child per month from birth to the age of 6.  Now let’s see what happens if we contribute the UCCB into an RESP and take advantage of the CESG, still with me?
Investing $100.00 per month with a 20% top up at just 3% will yield $9,453.53 over 6 years.  Just think; that’s almost $9,500 dollars that you don’t have to come up with to cover education expenses and you didn’t contribute a single penny of your own money to do it! 
That same $9,453.53 will continue to grow inside the RESP until it’s needed.  At age 18 and at an interest rate of only 3% (we’re being extremely conservative here to illustrate our point), that amount will have grown to $13,478.47.  At a more realistic 6% return, that same contribution will be worth $20,864.59.  Not bad for not having to put any of your own money into it; and there is still room to take advantage of the CESG!