Setting your kids on the right path with RESPs
When your child is young, post-secondary education can feel far away. There are lunches to pack, activities to get to, and plenty of everyday expenses competing for your attention. But as every parent knows, the years move quickly. Before long, your child may be thinking about university, college, trades training, an apprenticeship, or another path after high school.
The good news is you don’t need to have the full cost of education saved today. A Registered Education Savings Plan, or RESP, is an education savings plan that can help you save for your child’s education, start small, build over time, and make use of eligible government education grants that can add to your child’s education savings.
Why an RESP can make a difference
An RESP is designed to help families save for education after high school. The money can be used for many qualifying programs, including university, college, trade school, apprenticeship programs, CEGEPs, and other eligible post-secondary options. It can also help cover more than tuition, including books, tools, transportation, rent, and other education-related costs.
One of the biggest advantages is that eligible RESP contributions may qualify for the Canada Education Savings Grant. The basic grant adds 20% to eligible contributions, up to $500 per year and up to $7,200 over the beneficiary’s lifetime. Some families may also qualify for additional grant amounts based on income.
Eligible children from lower-income families may also receive the Canada Learning Bond, which can provide up to $2,000 over time. Personal RESP contributions are not required to receive the bond, but an RESP must be opened, and eligibility requirements apply.
You can start in a way that fits your family
Saving for education doesn’t have to mean making large contributions right away. Many families begin with a small monthly amount, then add more when their budget allows. Others use a portion of a tax refund, bonus, birthday gift, or Canada Child Benefit payment. Grandparents and other loved ones may also choose to contribute.
There is no annual contribution limit for an RESP, though there is a lifetime contribution limit of $50,000 per beneficiary across all RESPs. Government benefits such as the CESG and CLB do not count toward that lifetime contribution limit.
Starting earlier can give your savings more time to grow, but it’s never too late to ask what options may be available. If you have unused CESG room from previous years, you may be able to catch up on some grant opportunities in future years, depending on eligibility and contribution rules.
RESPs offer flexibility when plans change
Children grow into their own interests, and their plans may change along the way. An RESP can support many education paths, not just university. And if your child decides to delay school, choose a different program, or not attend a qualifying post-secondary program, you may still have options, depending on your plan and eligibility requirements.
When your child does enroll in a qualifying program, RESP funds can help with eligible education expenses. Educational Assistance Payments, which include government benefits and investment earnings, are reported as income by the student. Since many students have limited income while in school, they may pay little or no tax, depending on their situation.
There are limits on Educational Assistance Payments during the early weeks of enrollment. For full-time studies, up to $8,000 may generally be paid during the first 13 consecutive weeks of enrollment. For part-time studies, up to $4,000 may generally be paid for any 13-week period of enrollment.
Start with a conversation
An RESP is not a one-size-fits-all plan. The right approach depends on your child’s age, your budget, your timeline, and your comfort level with investment risk. Some families may prefer predictable savings options or GICs, while others may explore mutual funds through Aviso Wealth if they have a longer time horizon and are comfortable with market fluctuations.
An SCU wealth advisor can help you open an RESP, apply for eligible government benefits, choose savings or investment options, and review your plan as your family’s needs change.
Saving for education is really about giving your child more choice when the time comes. Whether they’re still in the glitter years or already planning their next step, starting the conversation now can help make the future feel more manageable.
Call SCU at 1.800.728.6440 or book an appointment online with an SCU wealth advisor.
