The Scenario: You are going to save up money for your childs future post-secondary education. Canadians achieve these savings through a Registered Education Savings Plan (RESP). An RESP is simply an envelope that financial investments such as shares, bonds, equities, or mutual funds are placed and can grow on a tax-free basis. Additionally, money contributed to an RESP is eligible to receive the Canada Education Savings Grant (CESG) which deposits 20% of the individuals deposits into the RESP every 6 months (up to a maximum of $1000 per year). The RESP can be contributed to, and CESG earned, up until the time the child turns 18 years old. After 18 years old, the RESP can continue to earn interest, but cannot be contributed to.

In order to complete this scenario, you will need to make these choices and research the following (no marks can be earned if valid research is not provided where required):

1. Pick an age for your child. The age must be a whole number between 0-4 years old.
2. Research the annual tuition of a 4-year degree program at any Canadian university today. Screenshot in Appendix 1B. Cite your source(s).
3. Research an interest rate to use for your RESP. Screenshot in Appendix 1A. Cite your source(s).
4. Based on the number of years for your child to reach 18, develop a savings plan that you will need to put into an RESP to allow them to attend the 4 year degree program of your choosing. Contributions can be any frequency (weekly, monthly, quarterly, semi-annually or even annually) and there are no tax considerations since RESP allow savings on a tax free basis.

Decisions and Information You Will Be Using In Your Calculations (4 points)

Age of Child: 1

Amount Contributed Each Year: $1200.00

Interest Rate that the RESP will be earning (provide details and show any work): 5%

Annual Tuition Today of Degree Program at Canadian University (provide details and show any work): Estimated annual tuition of Bachelor of Commerce is $8,000.00

1. Calculate the total amount in the RESP when the child turns 18. Show your work. (5 points)

2. Project the annual tuition cost for a 4-year degree program at a Canadian University when the child turns 18. Show your work. (2 points) (Assume the annual tuition will remain constant over the 4 years of the degree program).

3. Lets assume the child immediately enrolls in a 4-year degree program upon turning 18. Each annual tuition amount is paid in full in advance of the school year. Develop a 4-year plan showing how the RESP could be used to fund the childs post-secondary education. Show all work and explain any assumptions or requirements. (12 points)