To Clients: Education savings (updated)

(May 2008) Government grant money is not the easiest thing to come by for your typical clients, unless they have children and an education savings plan. Encourage your clients to collect this “free” money wherever they can get it — send them this customizable template letter outlining the opportunities and advantages of saving for a child’s education using a Registered Education Savings Plan (RESP).

Dear [Client’s name],

If I told you the government was handing out money for free, would you be interested? Of course you would. All you need to do is set some money aside for your child’s (or children’s) education — something you may be considering doing anyway.

According to information released by Statistics Canada last year, university tuition fees increased 4.3% annually, on average, between 1997 and 2008. In total, they’ve increased 209% since the 1990-1991 school year.

In 2007, Canadian undergraduate students paid an average of $4,524 a year in tuition fees. Some professional programs charge significantly higher amounts than that — first-year tuition for a law student at the University of Toronto ranges from $6,000 to $20,000, depending on the program. Add in books, food and housing costs and you could be looking at a very significant expense.

There are, fortunately, savings vehicles that can help you prepare.

A Registered Education Savings Plan (RESP) is a little bit like a Registered Retirement Savings Plan (RRSP). You can’t deduct the contributions, but your earnings do accumulate tax free, to be taxed in your children’s hands, not yours, when they withdraw funds. Since students tend to have little other income, they’ll probably end up paying very little (if any) taxes on the money they receive.

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• To Clients: Education savings (updated)

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In 2007, the Conservative government also made some significant changes to the RESP rules. The annual contribution limit of $4,000 was eliminated, and parents can now contribute up to $50,000 — that’s up from $42,000 — in total, to each child’s RESP.

There’s also a lucrative Canada Education Savings Grant (CESG) available to anyone who opens an RESP. The government will top up your plan with a grant equal to 20% of your contribution, up to an annual maximum of $500 and a lifetime maximum of $7,200.

You don’t have to be rich to take advantage of the plan, either. In fact, if the child’s family earns $37,178 or less a year, the plan is eligible for a CESG worth 40% on the first $500 you deposit every year. The Canada Learning Bond also offers children who qualify for the National Child Benefit supplement — a special $500 payment at birth, plus $100 each year they receive the supplement, until the child turns 15.

If you’re interested in learning more about the education savings options available to you, I hope you won’t hesitate to contact me at the number above.

Yours sincerely,

[Your signature]

[Your name]

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com

(05/20/08)