The Back to School countdown is on, and with the now confirmed addition of the enhanced Universal Child Care Benefit (UCCB)
, we though t it worthwhile to re-issue this post using the new numbers.
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 (Registered Education Savings Plan) 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 $160.00 per child per month from birth to the age of 6 and $60.00 per child per month from age 6 through 17. Now let’s see what happens if we contribute the UCCB into an RESP and take advantage of the CESG... still with me?
Investing $160.00 per month with a 20% top up at just 3% will yield $15,125.64 over 6 years. Investing another $60.00 per month, also with a 20% top up at 3% will yield another $21,565.55; while the original amount continues to grow inside the RESP until the age of 18 for a grand total of $34,026.90!
Just think; that’s over $34,000.00 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*; at an interest rate of only 3% (we’re being extremely conservative here to illustrate our point). At a more realistic 6% annual rate of return, that same contribution would be worth $48,514.16
. 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!
*It’s worth noting that the UCCB is a taxable benefit, so you would be wise to ensure you are prepared to cover the tax bill.