Save for Your Children and Yourself Using the Same Dollar

Jon Glougie

June 29, 2022

Save for Your Children and Yourself Using the Same Dollar
As we near the end of another school year, many Canadian children will be graduating and moving into a post-secondary school/program in the fall. The children may or may not have a savings plan to help fund this education, and with the cost of everything going up all around us, parents may be feeling the financial squeeze. There are only so many dollars to go around every month, and if you are looking for a way to stretch your dollars as much as possible, and to accomplish both a retirement savings plan for yourself, as well as a savings plan for your child(ren)’s education, consider this. Contributing to an RRSP is a great way for you to save for retirement. Your contributions will help reduce your income tax payable, but they will also potentially provide you with an annual tax refund. This tax refund can then be contributed to a RESP ($2,500/ear per child at most). The contribution into the RESP will then be matched with a government grant of 20% of your contribution (up to a maximum annual grant of $500/child). As an example, if you are in a 40% marginal tax bracket and you contribute $1,000 to an RRSP, you should receive a refund of approx. $400. This $400 can then be contributed to your RESP and the government will provide a grant of $80. So, you start with $1,000 and through the refunds/grants, you can turn your $1,000 into $1,480!

Written by:
Jon Glougie, CFP^®, CIM^®
Associate Portfolio Manager
Luft Financial, iA Private Wealth