Profit from these education savings strategies
 
Tuition fees are increasing, making it more important than ever for parents to get a head start on saving for a child's education. One of the most effective ways to save is with a Registered Education Savings Plan (RESP). The following six tips will help you make the most of this long-term, tax-deferred investment vehicle. No limit on yearly contributions.

Tip 1 - Get the grant. Under the Canada Education Savings Grant (CESG) program, the government will add 20% to annual RESP contributions of up to $2,500 for a maximum grant of $500 per year, per beneficiary ($7,200 lifetime maximum). That's a guaranteed 20% return, over and above your tax-deferred investment earnings. The beneficiary of the plan must be a Canadian resident and under 18 in order to qualify.

If you don't contribute enough money to receive the maximum $500 grant in one year, you can carry forward the grant room and catch up in a future year. The maximum grant payable in any given year is $1000.

Tip 2 - Get family support. If you're finding it hard to balance family RESP contributions, RRSP contributions, and debt reduction goals, let others help. Grandparents and other relatives may be eager to help you build your children's education fund.

Tip 3 - Get the growth you need. If you start making contributions when your children are young, you can include Canadian and international equity funds in their RESPs to give you maximum long-term growth potential. As the plan beneficiaries get closer to starting college or university, you can adjust the asset mix towards less volatile investments.

Tip 4 - Get the right type of plan. It's important to prepare for the possibility that the plan's beneficiary may choose not to go on to post-secondary education. A family RESP, which has several children as beneficiaries, may give you more flexibility than an individual RESP. If one child doesn't go, another child may be able to use the money.

Tip 5 - Get the RRSP rollover. If your child does not go on to college or university, as much as $50,000 in RESP earnings may be rolled over, tax-free, into your own or a spousal RRSP, provided you have sufficient contribution room (certain other conditions apply).
You and your spouse should coordinate your RRSP contributions so that sufficient contribution room exists. Naming both spouses as plan subscribers means that RESP money can be rolled over into either of your RRSPs.

Tip 6 - Get started as soon as possible. The sooner you start a plan, the longer the investments will have to benefit from the tax-deferred power of compound growth. Professional guidance can help you plan your education funding strategy and choose appropriate RESP investments.