TORONTO, ONTARIO--(Marketwire - Sept. 19, 2012) - As part of BMO Financial Group's ongoing commitment to financial literacy and 'Making Money Make Sense' for Canadians, BMO is releasing a financial tip every week in 2012.
BMO's Financial Tip of the Week: Opening a Registered Education Savings Plan (RESP) when children are young can help relieve financial pressure when they are ready to start university or college.
Today, a four-year university degree can cost upwards of $60,000. For a child born in 2012, the costs of a four-year university degree could reach $140,000.
"The costs associated with post-secondary education can be daunting," said Robert Armstrong, Vice President, Managed Solutions and Registered Plans Strategy, BMO Investments Inc. "It's critical to get a head start on saving by opening an RESP as soon as possible."
BMO Investments Inc. offers the following tips for Canadians interested in opening an RESP:
Start early and make regular contributions: Start making regular contributions as early as you can. Contributing $500 per year to an RESP from the time a child is born could result in more than $20,000 saved by the time the child enters college or university.
Take advantage of government grants: Government grants and compounded return can add significantly to an RESP's total savings. For example, the first $2,500 in RESP contributions per year receive a matching 20 per cent Canada Education Savings Grant from the federal government, which can be as much as $500 annually.
Mix it up: Cash and mutual funds are not the only ways to build up an RESP. Include a variety of investments such as guaranteed investment certificates (GICs), stocks, bonds and Exchange Traded Funds.
Speak with a financial professional: A financial professional can help you develop a financial plan that incorporates all of your short- and long-term goals, including saving for a child's education. Together, you can determine the RESP contribution methods and strategies that are right for you.
Inspire alternative gift-giving: RESP contributions make great gifts for special occasions, so let friends and relatives (including grandparents) know that you are receptive to receiving them for your child's future education. If two sets of grandparents each deposit $100 per year to their grandchild's RESP, the RESP could be worth $11,000 by the time the grandchild turns 17.
To learn more about saving and RESPs, please visit: www.bmo.com/resp.
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