There is a surplus. You have enough saved for higher education from RESP alone!
A Registered Education Savings Plan (RESP) is an investment account to fund a minor's educational future. By investing in an RESP account, you may qualify for a variety of national and provincial grant programs. To learn more about how to qualify, apply for, and receive these grants, you can visit our RESP page. Our comprehensive calculator accounts for the money that you deposit into your RESP account, the interest and investment earnings from this money, grants that you qualify for, as well as the interest and investment earnings from these grants.
Under the Breakdown of Savings heading in the Results section, the Savings from Contributions accounts for the direct contributions that you make into your RESP account. It assumes that you contribute $1,500.00 annually from age 5 to 18.
The Savings from Investments accounts for the accrued investment earnings at 5% per year. If you choose to invest your RESP funds into a volatile asset such as stocks, this rate of return will not be consistent. Within your RESP account, you can invest in a variety of options such as mutual funds, ETFs, GICs, stocks, bonds, or any combination of the above. You should do research on the expected rate of return depending on your investment option and enter that number into the calculator for the most accurate calculation.
The Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB) are two grants that the Canadian government uses to incentive RESP investment. These two grants have very different qualification criteria and grant amounts. The CESG matches 20% of the annual investment amount up to $500 per year. So, to receive the maximum amount of CESG, you will want to invest $2500 yearly. If your family has lower income, you can receive up to $600. There is a lifetime limit of $7200. Additionally, the CESG is only available while the beneficiary is under 18. The CLB grants $500 dollars the first year that you invest in an RESP, and $100 every year afterwards that you invest in your RESP. This grant is only accessible to families below an income threshold which depends on the number of children within the family. In the calculator, you only enter one net family income. If this income increases or decreases in the future, you should investigate whether you qualify for the CLB. Additionally, the income thresholds changes year to year adjusting for inflation and other factors. It is only available before the beneficiary reaches age 15.
One important note about the CLB is that it is retroactive. This means that if you did not know about the CLB, but now realized that you qualified for years in the past, you can contact the Canadian government to claim past installments of CLB.
The final contributior to RESP savings is provincial grants. Currently, there are only two provinces which offer grants - British Columbia and Quebec. You need to be a resident of these two provinces to qualify for their programs. BC has the British Columbia Training and Education Savings Grant (BCTESG) and Quebec has the Québec Education Savings Incentive (QESI). The BCTESG grants $1200 to eligible students and the QESI matches up to 20% of annual RESP contributions depending on annual income. It has a yearly limit of $500 and a lifetime limit of $3600.
Based on the RESP calculator results above, there is a surplus. The RESP amount is enough to cover all educational expenses. Be sure to estimate the cost of education per year carefully. This will include all living expenses year to year for the beneficiary. You must also account for inflation, which may increase costs substantially when the beneficiary attends higher education.
On a brighter note, the RESP does not account for all the possible funding for the beneficiary. Scholarships and government aid can drastically lower educational costs. Moreover, the RESP is a very powerful financial tool to plan for your child's future.