If you are a parent or guardian, you are likely thinking about your child’s future. If post-secondary education is part of that plan, then you’ve probably heard about Registered Education Savings Plans (RESPs). But what exactly is a RESP—is it worthwhile to open one, and how do you do that?
Don’t fret—the team at Odlum Brown has a wealth of experience and expertise and has put together Basic Guide to RESPs to get you started!
What are RESPs?
RESPs are investment plans to save for post-secondary education for a child, grandchild, yourself or another individual. Family plans can also be opened.
Why should you open a RESP?
With individual and family RESPs, contributions can be withdrawn at any time tax-free, even if the child does not enroll in post-secondary education.* Earnings and growth are tax-deferred until withdrawn. If used to pay tuition, living costs, transportation, school supplies and other eligible expenses, withdrawn amounts are taxed as your child’s income to further reduce tax.
Aside from providing tax savings, RESPs can earn government incentives such as:
Canada Learning Bond (CLB)
- Available by opening a RESP, without having to contribute.
- Up to $2,000 available to modest-income families with eligible children born after December 31, 2003.
Canada Education Savings Grant (CESG)
- Available by opening and contributing to a RESP.
- A basic grant of 20% is offered on the first $2,500 of contributions made per year, per eligible child. Additional grants are available to lower-income families. $7,200 lifetime limit per child.
BC Training and Education Savings Grant (BCTESG)
- Available by opening a RESP before a child’s 9th birthday, even without contributing.
- $1,200 grant for children born after January 1, 2006. Both the child and their custodial parent or legal guardian must be BC residents when applying.
How to open a RESP
Your child needs a Social Insurance Number (SIN) to open an account. Once you have that, pick a RESP provider, such as a bank or credit union or an investment firm like Odlum Brown!
Generations have trusted Odlum Brown with their financial futures for more than 100 years. As a fully independent Canadian investment firm, they offer integrated wealth management solutions tailored to you. Contact them to learn more.
Have more RESP questions? Here are helpful resources: getsmarteraboutmoney.ca/learning-path/resps/ and canada.ca/en/services/benefits/education/education-savings.html.
*RESPs can also be offered as group plans (also known as scholarship trusts), which may not offer the same flexibility as individual and family plans, especially if a child does not pursue post-secondary education. Check the fine print before opening any RESPs.