We all need to save for our children's education

Excerpts from an article by Kelsey Rolfe, The Globe and Mail

"How to prioritize financial goals

If the choice is between RESP and registered retirement savings plan (RRSP) contributions, the calculation is more tricky. Mr. Bortolotti says the question depends on the client’s marginal tax bracket and age.

For those in the highest tax bracket or in their peak earning years, prioritizing RRSP savings may make more sense, but younger parents and those in a lower bracket won’t benefit from as significant a tax refund and could prioritize education savings.

In some specific cases like parents who need to pause contributions for a year or two – such as those who are anticipating renewing their mortgage at a much higher rate in a couple of years and want to prioritize paying down that debt – but have an eldest child approaching university age, they may be able to take advantage of a nuance in the family RESP rules, Mr. Sithamparapillai says.

Family RESPs don’t require parents to withdraw the government grants in accordance with each child. When they’re ready to save in the RESP again, parents could make catch-up contributions evenly to each child to get the government grant match for all children but pool the grant money and withdraw it in the eldest child’s name up to the $7,200 maximum.

Mr. Sithamparapillai acknowledges this would mean they have less grant money to pull out for their younger children, but this approach is typically most helpful for parents who wouldn’t have been able to make the maximum contributions regardless."

"However, he says parents who’ve contributed the maximum amount should expect to see between $60,000 and $80,000 in the account by the time their child goes to school, which would get them “most of the way” to a fully covered university or college experience. And even for parents who can’t contribute the maximum amount, it’s still a worthwhile plan."

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