Will you have saved enough money to put your children through school?

Investing in an undergraduate university degree provides a huge rate of return. According to Statistics Canada, individuals with a university degree earn approximately $20,000 more per year than individuals without a university degree. Education costs (tuition, books and academic fees) for a four year degree pursued in 18 years will be approximately $64,000. Living expenses for a four year degree pursued in 18 years will be approximately $72,000 for someone living away from home and approximately $37,000 for students living at home, according to Statistics Canada. An inflation rate of approximately 3% was used in the analysis.

Therefore, the total cost of a four year undergraduate degree is approximately $136,000 for students living away from home and approximately $101,000 for students living at home.

Do you have a plan to start saving for your children’s education? How should you save for your child’s education? Should you use an registered education savings plan (RESP)? What type of registered education savings plan (RESP) should you set up? Should I use a formal trust or an informal trust?

Quick Facts on Benefits of an Registered Education Savings Plan:

• Tax deferral: Investment income is not taxed in the registered education savings plan.
• Government Grants: The government will contribute 20% of your contribution; the grant maximum amount is $500 - 20% of $2,500. There is a catchup contribution for one additional year.
• Income splitting: Instead of the parent investing excess cash, the parent can make a contribution to the child’s registered education savings plan. The child will be taxed on the withdrawal and pay the tax at that point, if any.

Registered education savings plan changes:

Registered education savings plans (RESP’s): These plans are great vehicles to save for a child’s education. Changes in 2007 made these plans even more attractive. The contributor does not receive a deduction for the contribution; however, the government kicks in with a 20% Canada education savings grant (CESG) on the first $2,500, if your net family income is greater than approximately $75,000 (indexed). The grant increases if you are in the lower tax brackets . The income in the registered education savings is sheltered from tax until the money is withdrawn from the registered education savings. When the money is withdrawn from the registered education savings to attend a post secondary institution, it is taxed in the child’s hands.

What happens if the funds in the RESP are not used?

• You would be required to return the grants.
• You could transfer the funds to the subscriber’s (or spouse) Rsp, if he or she has available contribution room. The maximum that could be transferred is $50,000. The plan needs to be in existence for at least ten years and the beneficiary needs to be at least twenty one years of age.
• You could change the beneficiary to another child.
• You could withdraw the investment income and be subject to tax his/her marginal tax rate and the additional 20% tax.

The GTA Wealth Advantage and Your Resp’s

• Independent: GTA Wealth has an independent financial team. The financial advisers at GTA Wealth can access more that 50 investment firms including the banks to service your needs . We will select the investments that best suit your needs without any allegiance to a particular company; as opposed to an employee working for one company. The financial advisers GTA Wealth work for you, not an employer.
• More resources: GTA Wealth can access investment firms with offices around the globe and more than $1.6 trillion in assets under management(Fidelity Investments); larger than all the assets under management of the Canadian banks.
• Unique investment opportunities: Access to institutional investment managers that have experience managing corporate and government pension funds for more than 40 years.This expertise leads to consistent performance and in some cases, capital preservation. Access to currency neutral options, and the ability to trade in European countries (via Jitney) that competitors don’t have legal filings to do so.
• Multidisciplinary approach: GTA Wealth can provide multiple financial services that will result in efficiency for the client and superior results. We are able to analyse various facets of your wealth building plan, such as, tax, investments, debt, insurance etc. Why go to a multitude of financial advisors when you can come to one; a financial advisor that is knowledgeable about your entire wealth management plan. Capitalize on the synergy.
• Tax efficiency: Access to corporate class funds and tax efficient systematic withdrawal plans.
• Flexible: The client can set up monthly contributions from his/her bank account. Monthly contributions amounts can be changed at any time. Systematic withdrawal plans can also be set up for clients that need a consistent cash flow.
• Expertise: GTA Wealth has accountants and certified financial advisers to answer all your tax and investment planning questions.
• Enhanced reporting: Clients can access their accounts online and receive statements electronically.
• Low fees:  There is no charge to set up an registered education savings plan (RESP) account.

Let GTA Wealth help you save your children's post secondary education

With the fast rising cost of higher education, the most important advantage you can give your children is a debt free post secondary education. Let the financial advisers at GTA Wealth tailor an education savings plan to meet your requirements and give your children the gift of a debt free post secondary education. It is the one of the most important head starts in life you can give them.

Contact or call the GTA Wealth Management Inc. tax accountants and financial advisers toll free at 1 855 GTA WLTH (855 482 9584) for an education savings plan tailored to your needs. GTA Wealth Management Inc. has three convenient locations in Mississauga, Toronto and Markham to serve you.

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