A Registered Education Savings Plan (RESP) is a special savings account that can help you, your family, or your friends save early for your child’s education after high school. The Government of Canada allows savings for education to grow tax free until your child named in the RESP enrolls in education after high school. The child named in an RESP is known as a beneficiary. A parent, grandparent, other relative, or friend, can open an RESP for a child. The person who opens an RESP is called a subscriber.
When you have an RESP, you can start saving immediately for your child's education in the future. Many parents wonder how much to save. They also wonder how soon they should start. The answer is simple. Save as much as you can afford. Start today. By starting early, tax-sheltered earnings on your savings can grow surprisingly quickly. Further, if you are saving for your child’s education, the Government of Canada will help you with special saving incentives that are only available if you have an RESP, including the Canada Education Savings Grant and the Canada Learning Bond. If you live in Alberta you may also be able to get an additional grant under the Alberta Centennial Education Savings Plan.
A $500.00 Canada Learning Bond is offered by the Government of Canada to help fund your child’s education after high school. Plus $100.00 is available every year until the child turns 15 years old. Conditions apply. Please contact your advisor for details regarding this RESP opportunity.
A BC Training and Education Savings Grant of $1,200.00 is also available for RESP beneficiaries. Like above, conditions apply. Please make sure to discuss this RESP opportunity with your Macnaughton & Ward Financial Services Ltd. advisor.
Once you have decided whether to open a family plan, individual plan, or group plan, ask your RESP provider about your investment choices. Some RESP providers offer a variety of investment choices while others have a set investment plan.It is important to take your time. Ask your RESP provider questions about your investment choices, including the advantages and risks of each. Some of your investment choices may have service fees or penalties. It is important to ask for a list of the fees or penalties that may apply.
As soon as the child named in your plan is enrolled in a qualifying educational program, he or she can start receiving payments from the RESP called Educational Assistance Payments (EAPs).
You can choose from three general types of RESPs: family plans, individual plans, or group plans.
In a family plan, you can name one or more children as beneficiaries of the RESP, but they must be related to you. They may be your children, adopted children or grandchildren.
An individual plan is for one beneficiary and the person does not have to be related to you.
A group plan is offered and administered by a group plan dealer, and each plan has its own rules. Usually, group plan dealers must invest the money in low-risk securities such as bonds, treasury bills and guaranteed income certificates (GICs). Generally, you have to sign a contract agreeing to make regular payments into the plan over a certain period of time.
In a group plan, your savings are “pooled” with those of other beneficiaries (or children) of the same age. The amount of money each child gets is based on how much money is in the pool, and on the total number of students in the pool who are in school that year.
You can name only one child in a group plan and the child does not have to be related to you. If the child does not continue with education after high school, your group plan dealer will tell you what will happen.
Since each group plan is different, it is important to ask your group plan dealer for details.
You can open an RESP through an RESP provider. RESP providers include most financial institutions, such as banks and credit unions, as well as group plan dealers and financial services providers. At MWFS we have access to many RESP plans. It is important to choose an RESP provider carefully. Your provider has a role to play throughout the life of your RESP, which can remain open for a maximum of 26 years:
Some RESP providers charge service fees. Some may also limit the amount of money you can put into your plan and tell you how often you can contribute. Before you open an RESP, ask the RESP provider to explain any fees, limits, penalties or requirements to make regular payments that may apply.
Opening an RESP is not difficult. In fact, you just need to take a few simple steps:
Usually, a qualifying educational program is a course of study that lasts at least three weeks in a row, with at least 10 hours of instruction or work each week. A program at a foreign educational institution must last at least 13 weeks.
Qualifying educational programs include apprenticeships, and programs offered by a trade school, CEGEP, college or university.
RESP funds can be used for full or part-time study in a qualifying program.
To find out more about qualifying educational programs contact the RESP Specialists at MWFS today.
If your child decides not to continue education after high school, you may be able to: