In my last two posts, I talked about how to use RRSPs and TFSAs to save for your future. Today I’m going to talk about RESPs or Registered Education Savings Plans.
What is an RESP?
A Registered Education Savings Plan is a great way to help a special child in your life save for their education. Whether it’s your child, grandchild, nephew, niece or another child you want to help – you can save them a lot of stress and expense down the line by contributing to an RESP for them. RESPs came along too late for my parents to take advantage of them – but they did help me pay for school, which was fantastic and enabled me to graduate without debt.
What are the benefits of an RESP?
There are several benefits to using an RESP to save for a child’s education:
- There’s no yearly maximum or minimum – so you can make contributions when and how it works for you.
- Any growth in them is tax-sheltered.
- The beneficiary of the RESP can use them for a variety of post-secondary costs including housing and tuition.
- Government matching – They’ll match 20% of your RESP contributions up to $2,500 each year – with a lifetime maximum of $7,200.
What happens if the child the RESP is for doesn’t want to attend any post-secondary schooling?
Depending on the type of plan and who opened the RESP, you can:
- Transfer the funds to another child.
- Transfer the funds to your RRSP.
- Close the RESP.
- Transfer the funds to an RDSP, if the child qualifies for one. I’ll talk more about RSDPs (Registered Disability Savings Plans) in my next post.
How can I get started?
Before you open an RESP, you’ll need a Social Insurance Number (SIN) for the child. It may be tempting to open an RESP individually for a child if you want to make contributions – but it’s likely better just to have one RESP open, instead of several. So if you aren’t the child’s parent or grandparent, talk to them about making RESP contributions through them if they’ve already opened one.
You’re Ready To Get Started
Now you know all about the benefits of helping a child pay for their education via an RESP. Even if you can only contribute a little bit each year, it will add up – especially with the matching government grant. Have you contributed to an RESP for someone? Tell me in the comments!
