Hey there fathers! Allow me to introduce you to Roger Lee. He is a REAL DADS supporter and a real dad himself! Roger is a chartered accountant in Newmarket, who will be offering a series of free seminars on 'Financial Planning for Fathers', through REAL DADS. He is a guest writer for this edition of the Father Friendly Email. This email is about Registered Education Savings Plans (RESPs). If you have small children and think you don't need to think about university or college - think again! You are the one who definitely needs this email! Keep checking the Calendar/Events link for the time of these free seminars. They will be held in Newmarket beginning around the end of October or early November. Enjoy his contribution!
Stay REAL!
"Grad" Expectations
"If your plan is for a year, plant rice. If your plan is for a decade, plant trees. If your plan is for a lifetime, educate children." -- Confucius
Where did the summer go? For most parents, it’s a bit of a relief to see the kids off to the bus stop or to school. But before you know it; with your help and encouragement, your kids will be heading to college or university.
A recent survey indicated that both resident and non-resident Dads who were involved with their children's schools provided significant educational advantages not realized when only mothers participated in school activities. Fathers played more and differently with their children compared to mothers. Dads also tended to be more physical and appeared to foster the development of analytical skills, particularly in their sons. Children appeared to rely more on their fathers for factual information and often believe that fathers and mothers have different family goals. Fathers, children say, think it's important that they learn and do well in school. Mothers want them to "feel special and important." Parents can serve as good role models or promote behaviours like being conscientious, ambitious and methodical; all of which are likely to contribute to making the child successful at school. Getting parents to be aware of the advantages of doing well in school and the benefits that this brings to their children could be an effective policy for raising average grades writes Concordia University economist James McIntosh. It is a powerful thing for parents to communicate to their children that they expect them to go on to college or university and that post-secondary education is a valuable investment. Knowing that college or university is in their future; children tend to focus on their elementary and high school grades to ensure they'll go to the school of their choice.
According to the RBC RESP Poll, conducted by Ipsos-Reid, 79 per cent of parents say the expense of higher education is worth it because university and college grads earn more money than high school grads do. A majority (61%) of parents fear that their child may not even be able to go to college/university because of the high costs. But, eight in ten (79%) parents think the cost is worth it because it will result in a higher salary for their child. And half (51%) would even be willing to refinance their mortgage so that their child could attend. On average, parents also expect their children to contribute 30 per cent towards the cost of their post-secondary studies. But the high cost of education coupled with a longer timeframe to find a job has resulted in an average debt for an undergraduate student in Ontario of $22,700. The average undergraduate debt upon completion of four years of schooling at Yale - one of the most expensive and prestigious institutions in the U.S. - is $18,000 Canadian. This has increased from $10,800 in 1990 and $14,504 in 1998. In Canada, student debt has reached such mammoth proportions that it may begin to exert a drag on the overall economy. So what’s the solution? One of the most effective ways to create an education fund that grows to offset the future cost of education is through a Registered Education Savings Plan (RESP). RESPs were created by the federal government to encourage Canadians to save for a child’s education. Here's why an RESP is such a powerful cash-accumulation vehicle:
Tax deferred growth.
RESPs previously let you contribute up to $4,000 per year towards the education of a beneficiary. The maximum contribution you could make during the plan's 25-year maximum life span was $42,000 for each child. Contributions were not tax-deductible, and the money grew tax-free until it was withdrawn. At that time, tax is charged to the student, in most cases, the withdrawals are effectively tax-free since any amount owing is offset by the student's education credit and personal tax credit. As a result of the last federal budget, the annual $4,000 RESP contribution limit has now been removed. So, parents can now contribute any amount at any time, up to the lifetime contribution limit of $50,000. This change allows parents to take advantage of the RESP's tax-deferred, compounded growth. Even small increases early in the RESP can result in additional thousands of dollars towards your child’s college or university education.
Government Grants
The Canada Education Savings Grant (CESG) makes RESPs an even more attractive way to save. Each year until the child turns 18, the federal government will provide you, the subscriber, a 20% return for every $2,500 you contribute for each child, of $500 per child per year to a maximum grant of $7,200 (even for non- savvy investors, that’s a return that’s hard to beat). Parents who have not maximized their RESP contribution, now have extra unused grant room where they can 'catch-up' their CESG-increased from $800 to $1,000 a year. Lower-income families get an even better deal. Recent changes have increased the grant to 40 cents on the first $500 invested by families that earn less than $37,178, and 30 cents on the first $500 for families earning between $37,178 and $74,357. Lower-income families may also be eligible for the Canada Learning Bond, a $500 one-time RESP grant, which is supplemented by an additional $100 a year until the child is 15. The deadline for the deposit is December 31, 2007. The one key stipulation to the CESG is that the child must have a Social Insurance Number (SIN).
Flexibility
The funds can be used at any qualifying college or university, and even some apprenticeship and correspondence programs. If your child decides not to pursue further education, you get your principal returned and any returns on that money can usually be rolled into RRSPs to avoid taxes; all the grant money, however, goes back to government coffers. Anyone can contribute to an RESP - parents, grandparents, aunts, uncles and even good friends - but the total contributions can't exceed the RESP limits for each child.
Although the CESGs and CLBs are available for all RESP offerings, all RESPs are not created equal. Please consult your financial advisor on which RESP product best suits your family’s present and future requirements.
Roger Lee
Stay REAL!
"Grad" Expectations
"If your plan is for a year, plant rice. If your plan is for a decade, plant trees. If your plan is for a lifetime, educate children." -- Confucius
Where did the summer go? For most parents, it’s a bit of a relief to see the kids off to the bus stop or to school. But before you know it; with your help and encouragement, your kids will be heading to college or university.
A recent survey indicated that both resident and non-resident Dads who were involved with their children's schools provided significant educational advantages not realized when only mothers participated in school activities. Fathers played more and differently with their children compared to mothers. Dads also tended to be more physical and appeared to foster the development of analytical skills, particularly in their sons. Children appeared to rely more on their fathers for factual information and often believe that fathers and mothers have different family goals. Fathers, children say, think it's important that they learn and do well in school. Mothers want them to "feel special and important." Parents can serve as good role models or promote behaviours like being conscientious, ambitious and methodical; all of which are likely to contribute to making the child successful at school. Getting parents to be aware of the advantages of doing well in school and the benefits that this brings to their children could be an effective policy for raising average grades writes Concordia University economist James McIntosh. It is a powerful thing for parents to communicate to their children that they expect them to go on to college or university and that post-secondary education is a valuable investment. Knowing that college or university is in their future; children tend to focus on their elementary and high school grades to ensure they'll go to the school of their choice.
According to the RBC RESP Poll, conducted by Ipsos-Reid, 79 per cent of parents say the expense of higher education is worth it because university and college grads earn more money than high school grads do. A majority (61%) of parents fear that their child may not even be able to go to college/university because of the high costs. But, eight in ten (79%) parents think the cost is worth it because it will result in a higher salary for their child. And half (51%) would even be willing to refinance their mortgage so that their child could attend. On average, parents also expect their children to contribute 30 per cent towards the cost of their post-secondary studies. But the high cost of education coupled with a longer timeframe to find a job has resulted in an average debt for an undergraduate student in Ontario of $22,700. The average undergraduate debt upon completion of four years of schooling at Yale - one of the most expensive and prestigious institutions in the U.S. - is $18,000 Canadian. This has increased from $10,800 in 1990 and $14,504 in 1998. In Canada, student debt has reached such mammoth proportions that it may begin to exert a drag on the overall economy. So what’s the solution? One of the most effective ways to create an education fund that grows to offset the future cost of education is through a Registered Education Savings Plan (RESP). RESPs were created by the federal government to encourage Canadians to save for a child’s education. Here's why an RESP is such a powerful cash-accumulation vehicle:
Tax deferred growth.
RESPs previously let you contribute up to $4,000 per year towards the education of a beneficiary. The maximum contribution you could make during the plan's 25-year maximum life span was $42,000 for each child. Contributions were not tax-deductible, and the money grew tax-free until it was withdrawn. At that time, tax is charged to the student, in most cases, the withdrawals are effectively tax-free since any amount owing is offset by the student's education credit and personal tax credit. As a result of the last federal budget, the annual $4,000 RESP contribution limit has now been removed. So, parents can now contribute any amount at any time, up to the lifetime contribution limit of $50,000. This change allows parents to take advantage of the RESP's tax-deferred, compounded growth. Even small increases early in the RESP can result in additional thousands of dollars towards your child’s college or university education.
Government Grants
The Canada Education Savings Grant (CESG) makes RESPs an even more attractive way to save. Each year until the child turns 18, the federal government will provide you, the subscriber, a 20% return for every $2,500 you contribute for each child, of $500 per child per year to a maximum grant of $7,200 (even for non- savvy investors, that’s a return that’s hard to beat). Parents who have not maximized their RESP contribution, now have extra unused grant room where they can 'catch-up' their CESG-increased from $800 to $1,000 a year. Lower-income families get an even better deal. Recent changes have increased the grant to 40 cents on the first $500 invested by families that earn less than $37,178, and 30 cents on the first $500 for families earning between $37,178 and $74,357. Lower-income families may also be eligible for the Canada Learning Bond, a $500 one-time RESP grant, which is supplemented by an additional $100 a year until the child is 15. The deadline for the deposit is December 31, 2007. The one key stipulation to the CESG is that the child must have a Social Insurance Number (SIN).
Flexibility
The funds can be used at any qualifying college or university, and even some apprenticeship and correspondence programs. If your child decides not to pursue further education, you get your principal returned and any returns on that money can usually be rolled into RRSPs to avoid taxes; all the grant money, however, goes back to government coffers. Anyone can contribute to an RESP - parents, grandparents, aunts, uncles and even good friends - but the total contributions can't exceed the RESP limits for each child.
Although the CESGs and CLBs are available for all RESP offerings, all RESPs are not created equal. Please consult your financial advisor on which RESP product best suits your family’s present and future requirements.
Roger Lee