Setting your kids on the right path with RESPs

As a parent, you know that life goes by fast. One minute you’re wondering why glitter is listed on your eight-year-old’s school supply list, and the next, you’re asking yourself how you’ll be able to afford a $2,000 laptop for university.
 
That’s where Registered Education Savings Plans (RESPs) come in. They’re the federal government’s way of helping you save for your child’s postsecondary education. In other words, they help you check that laptop, along with tuition, off their school supply list.

By starting in those glitter years — or even earlier — you’re ensuring much more peace-of-mind down the road.
While you may be familiar with the name and concept of RESPs, this guide is an opportunity for you to take an in-depth look at how the product works and how to make the most of your investment.

RESPs have a maximum lifetime contribution of $50,000 per child, with no yearly contribution limits. They’re tax-deferred, meaning withdrawals are taxed at the student’s tax bracket — which is likely lower than your own. Although that feature alone is a big advantage, the federal government will also contribute 20% on the first $2,500 deposited into an RESP each year through the Canadian Education and Savings Grant (CESG) program. If you don’t contribute in one year, the government allows you to maximize the CESG the following year, when you do. If you contribute $5,000, the government will contribute 20% on the entire contribution amount, not just the first $2,500, for a total grant of $1,000.

In addition, families can receive an additional amount of CESG based on income level. To learn more about income adjustments, visit the Government of Canada CESG website.
 
As a parent juggling multiple competing expenses and savings goals, you may be at times challenged to find extra savings for this kind of long-term investment. However, you can get more from your RESPs with these simple strategies:

1. Start early: Even if you only have a small amount to contribute each month, time also plays an important role in growing your savings. Not only are you earning more interest long-term, but you can maximize the CESG contribution by depositing funds every year. Tip: Some parents choose to put away a portion or all of their Child Tax’s credit they receive each month.
    

2. Set preauthorized debits: Preauthorized debits are a great solution to help you remember to contribute to an RESP. Setup is fast and easy — you can sit down and plan once, then let the automation do the heavy lifting.
    

3. Encourage RESPs contributions as gifts: RESPs are great ways for friends and family to invest in your child’s future. Keep in mind that with larger gifts, you’ll receive more in government grants if you divide the amount and contribute in later years.
    

4. Explore different savings and investment options: There are RESP options to suit every child’s education goal, including variable savings, GICs, and mutual funds. Your advisor can help you explore which option is right for you.

 
To help you feel more confident about getting started, here are a few frequently asked questions about RESPs. 

Frequently asked questions

Who can open an RESP as a subscriber?

Any individual who is the age of majority (in Manitoba aged 18) and has a valid Social Insurance Number (SIN) may open an RESP as a sole subscriber or jointly with their spouse/common-law partner (CLP), or former spouse/CLP if they are the legal parent of the beneficiary(s), each of whom must have a SIN. Individuals who are of the age of majority may be both the subscriber and the beneficiary. An RESP may also be opened by a primary caregiver, (a childcare agency or institution that has been assessed and deemed eligible by Employment and Social Development Canada (ESDC)), with formal approval under the Children’s Special Allowance Act, to receive grants and bonds for a child in their care.
The subscriber is responsible for naming the beneficiary(s) of the plan, making contributions, providing investment instructions, and requesting withdrawals. 

Can I use my RESP for costs other than tuition?

Yes, RESPs can be used to cover the cost of both tuition and a student’s living expenses as EAPs.

Can a child have more than one RESP?

Yes, a child can have RESPs at multiple financial institutions and from multiple subscribers. However, lifetime contribution limits still apply, so if a subscriber goes over the child’s withdrawal limits, they will have to pay penalties.

Can I open an RESP and another registered product for the same person?

Yes, a child can also be the beneficiary of other registered products, such as RDSPs, if they qualify. 

What information will I need to provide to provide to open an RESP?

To open a Registered Education Savings Plan (RESP) you will need information for both yourself (the subscriber) and the beneficiary (the child or children). Here’s a quick checklist:
•    The Social Insurance Numbers (SINs) for each beneficiary
•    Proof of Canadian residency for the beneficiary
•    Child's full name and date of birth
•    Proof of the relationship to the beneficiary for family plans 
•    Completed and signed primary caregiver forms (if applicable) 
•    Your banking information for contributions.

When you’re ready to take the next step, we’re here to help you start savings for your child’s education journey. 

Book an appointment to open your RESP today!