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Securing Your Child’s Education Against All Financial Odds!

What is RESP?

A Registered Education Savings Plan (RESP), is an investment plan supported by the Government of Canada that aims to encourage parents to invest in their child’s higher education. It is like a savings plan that would assist in sponsoring your child’s post-secondary education. This tax-advantaged plan allows you to save in a timely manner and support your child to accomplish their professional goals without having to rely on any high-interest student loans.

The authority to open an RESP account for a child is open to all, it could be a child’s parents or guardians, or grandparents, or any other relatives or friends. The contributions to this account can be made for a total of 31 years and expire by the end of 35 years from the time the account was been opened.

What are the various types of RESP options available?
There are 3 different plans available for you to choose from:
  • Individual RESP: This plan can be used by an individual contributor to sponsor the education of any one child beneficiary. The child may or may not be related to the account holder.
  • Family RESP: This plan can only have a single account holder who can contribute to the education of multiple children from the same family. The beneficiaries could be for the account holder’s own children, nephews, nieces, and any other child from the family that is related to them.
  • Group RESP: This plan can have more than one account holder, however, only one child can be the beneficiary. It is a group plan for different family members or individuals who wish to come together and contribute to the education of a single child.
What are the Benefits of having an RESP for your Child?
  • The federal government permits investment income to accumulate in a tax-advantaged account until the funds are withdrawn from the plan.
  • The Canadian government contributes a certain amount (free money) to these programs for students under the age of 18, in the form of grants which are up to $7200.
  • Many insurance companies offer a 15% Education Bonus of up to $75200, ask your insurance advisor for the same.
  • The grants and bonuses can be used for all post-secondary education expenses including tuition, lodging, school supplies, transportation, food, etc.
  • The money can be used to cover the expenses of a full-time course or a part-time degree as per the beneficiary’s choice.
  • With systematic and timely investments, you can build a significant pool of funds that can cater to your child’s higher education, as per their choice without having to face any financial curbs.
  • The investments accumulate over time and provide higher returns than many other regular savings options.
Grants by the Government of Canada to grow your child’s RESP

The Canada Education Savings Grant (CESG) is the additional money granted by the Government of Canada annually to your Registered Education Savings Plan. This was established by the federal government, to encourage parents to invest in their children’s higher education, at their earliest possible convenience.

You are granted a total of $500 or 20% of your total annual contribution to the RESP, whichever is lower. Your RESP is eligible for
a maximum grant limit of $7,200.

Canada Learning Bond (CLB):

The Government of Canada offers grants known as the Canada Learning Bond (CLB) to support low-income families in starting to save
for their child’s post-secondary education as early as possible.

  • The first year of eligibility is worth $500
  • In each consecutive year of eligibility - $100, until the child reaches the age of 15
  • The total CLB offered to ha child has a cumulative reach limit of $2,000
Provincial Education Savings Programs
  • British Columbia Training and Education Savings Grant (BCTESG)
  • Saskatchewan Advantage Grant for Education Savings (SAGES)
  • Quebec Education Savings Incentive (QESI)
What are the Yearly and Lifetime contribution limits on an RESP?
  • If your RESP contribution started from or after 2007:
  • there is no annual contribution limit
  • $50,000 is the maximum lifetime contribution you can make
What happens if the RESP remains unused?
This could happen in case the child beneficiary does not wish to continue his/her education after high school and the savings remain unused. In such a scenario you have a few options depending on the terms and conditions of your RESP:
To conclude, an RESP has many benefits to offer that come with certain criteria that can turn complex if you do not choose the right plan for you.
Poonam Khanna can help you secure your child’s future and their dreams by understanding the best possibilities with each plan, which can also add value to your investment growth.