My oldest is 12 next week. That means only 6 – SIX – years until she goes to college!
Six years is a long time if we’re talking time between hair cuts or time to read a book or even time to deal with a teenager, but time to save enough for college? At today’s prices?
Yes, a little panic is setting in for sure.
When I was asked to write a post about college savings, it seemed like kismet. College savings isn’t something I can continue to put my head in the sand and ignore. I HAVE to get moving on this and learning my options is one of the first steps.
529 Plans vs. RESP College Savings
I hadn’t heard of Registered Education Savings Plans (RESP) before so thought I’d share some basic information for any Canadian readers or those with the option to go to school in Canada (I have a few cousins at University in Canada).
Basically what I’ve gathered is that an RESP is the Canadian equivalent of the United States 529 Plan – with a few differences.
- With both 529 plans and RESPs, you don’t have to be related to the beneficiary to open the college savings accounts.
- While a 529 Plan allows up to $350,000 lifetime contributions per student, an RESP tops out at $50,000.
- You DO get a tax deduction for money you put into a 529. You do NOT get a tax deduction for funds deposited in an RESP.
- You can open a 529 or an RESP for yourself, not just for others.
- There is an annual contribution limit of $14,000 on 529s, but no annual limit on RESP contributions.
- There are multiple types of both 529s and RESPs available – typically from banks or investment firms.
The government will match 20% (up to $500 per year and $7,200 total) of your contributions to the RESP.
For this reason alone, for those of you that are Canadian residents, it sounds like an RESP is definitely worth checking out.
I definitely need to identify as many sources of FREE money as possible if I am going to put all 3 kids through college on my own.
Disclosure: I received compensation for this post . All words and opinions are my own.