Yahoo Finance Canadians are leaving free money on the table for their kids' education
Post-secondary education is far from cheap. Luckily, the federal government gives parents free money to help fund it.
If you contribute $2,000 to a Registered Education Savings Plan (RESP), Ottawa tops you up by $500. And yet, according to new research, only 41 per cent of Canadian parents take advantage of this.
Banks, credit unions, and other financial institutions can set up an account for you. But Eric Arnold, CEO of Planswell, says getting started is just too much of a hassle for a lot of parents.
"Traditionally, RESPs have been expensive and time-consuming to administer,” Arnold told Yahoo Finance Canada.
“Even with traditional institutions profiting off high-fee mutual funds or illiquid group investment plans, it has been expensive to set up for clients.”
A number of fintech startups, like Planswell, let you get set up in minutes with your smartphone. The company recently conducted a national study that found untapped RESPs are widespread across the country.
Low-income families can also qualify for the Canada Learning Bond, which contributes up to an additional $2,000 to an RESP— even if parents don’t contribute their own money. Employment and Social Development Canada (ESDC) estimates 3.4 million Canadians are eligible but 2.4 million people have not registered for it.
"Less than 40 per cent of eligible children have accessed their Canada Learning Bond, with many families unaware of their eligibility because it can be difficult to confirm whether or not they fall under the income level to receive the grant," says Luke Connell, executive director of the non-profit community group SmartSAVER.
SmartSAVER is teaming up with tax-filing platform UFile. The goal is to raise awareness about programs to help parents save for their kids’ education.
New research conducted for UFile by Forum Research found 77 per cent of Canadians say children aren’t learning enough about aspects of personal finance like taxes, banking, and spending.
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