That make RES Ps an awesome idea

How better to prepare our children for a successful future than to ensure they have some financial support for post-secondary education. Here are five things that make a Registered Education Savings Plan an excellent investment in that future.

An education is expensive.

A four-year university degree can cost upward of $60,000 including tuition, room and board, books and spending money. For children born in 2013, costs could reach $140,000 by the time they attend a post-secondary institution, BMO estimates.

You get free money.

You can receive up to $500 a year in federal government grants when you contribute the $2,500 annual maximum (the government matches 20% of the first $2,500 contributed each year for eligible children) to a lifetime limit of $7,200.“I don’t think you can really expand upon the fabulousness of free money,” says Sandi Martin, a fee-only financial planner.

If you need a boost, the government offers a jump start.

The Canada Learning Bond provides an extra $2,000 per child to help families that earned less than $43,561 in 2013.Families receiving the National Child Benefit don’t even have to make contributions to the RESP. The government will give you $500 for your child at birth and $100 each year until your child turns 15.Your children could be eligible for more grant money through a provincial program.

Your money grows tax-free.

Investment earnings in your RESP grow tax-free until withdrawn. “Eventually it will be taxed but it will be taxed in the student’s hands,” Ms. Martin says. A child in a low- or zero-tax bracket will pay little, if any, tax when funds are withdrawn.

If your kid decides against education, you have options.

You have 35 years after a plan is opened for your first child before an RESP has to be closed, so you can wait him out or transfer the RESP to another child.If you collapse the plan without using it for a child, you get all of your contributions back but will have to pay back any unused grant money. Withdrawn earnings count as income and are subject to a 20% withholding tax. You can also transfer up to $50,000 of earnings to a personal or spousal RRSP.