Play Video

RESP 101: How to Maximize Your Savings to Fund Your Child’s Education

RESP 101: How to Maximize Your Savings to Fund Your Child’s Education

From diapers one minute to college prep the next, childhood seems to fly by all too quickly. While your child entering university is an exciting milestone for any parent, planning for post-secondary finances can be daunting. From tuition and school supplies to housing and meal plans, the price tag for higher education has gotten quite steep in today’s age. Not sure how to fund your child’s education? That’s where Registered Educational Savings Plans (RESP) come in. RESPs are an excellent choice to help you start saving for your child’s educational future today so they can secure a financially stress-free post-secondary education.

What is an RESP?
A Registered Education Savings Plan (RESP) is a tax-advantaged savings vehicle designed to help you set aside money to fund your child’s post-secondary education. An RESP can hold a variety of investments, including stocks, bonds, exchange traded funds (ETFs), mutual funds, bonds, and Guaranteed Investment Certificates (GICs). Investment earnings in your RESP grow tax-free, which means more cash in your child’s hands to finance their academic future.

Who can open an RESP? 
Whether you’re a parent, relative, or close family friend – anyone is eligible to open an RESP account. Both the account opener and beneficiary are required to be Canadian residents to be eligible for this savings plan. To open an RESP, simply contact your financial institution or local credit union and provide them with a copy of your social insurance number (SIN) along with your child or beneficiary’s SIN and birth certificate.

Who can contribute to an RESP and how much?
Anyone over 18 years of age who is a Canadian resident with a valid social insurance number is eligible to contribute to an RESP. If saving for your child’s post-secondary education seems like a daunting task, it doesn’t have to be. Make financing your child’s education a family affair! Encourage your family members to swap a toy purchase for your child’s birthday or special occasions, with a contribution to your child’s RESP. By getting support from loved ones, you can reach your RESP savings goals faster, giving your child a better financial head start when they enter university. RESP contributions can be made at any time, but this savings plan is subject to a lifetime contribution limit of $50,000 per beneficiary[1]. Subscribers can make contributions for up to 31 years, and funds from this savings plan can only be used up to the end of the 35th year. Simply put, this flexibility offers your loved one plenty of time to make thoughtful decisions about their academic future.

1. Start contributing early
While your child might be in diapers now, it’s never too early to start putting money aside for their education. If you have the financial means to make a lump sum contribution to your child’s RESP, do it early. The earlier you start contributing, the longer these funds have to earn tax-sheltered interest, which means more savings for your child.

2. Make regular contributions
If you have a modest income and are concerned that you won’t be able to contribute to your child’s future education, do not worry. While there are no minimum requirements on how much and how often you can contribute to an RESP, setting up a consistent contribution schedule can help ensure you maximize the educational savings for your child. By making contributions as low as $10 per week, you can make a real difference in your child’s academic future. With small weekly contributions, your child can have a brighter tomorrow.

3. Take advantage of government savings programs
Saving for your child’s education can be expensive, but government savings programs can help your RESP funds stretch even further. With the Canadian Education Savings Grant (CESG) the Canadian government matches 20% each year (up to $500 per year) – and a lifetime total of $7,200 per beneficiary. That means, for every dollar you contribute, your child receives an extra 20 cents towards their education savings to manage the financial realities of post-secondary education. Now, that’s a win-win!

Make your child’s educational dreams come true with a credit union
Whether you’re a parent, relative, or family friend, post-secondary education is one of the best gifts you can give to a child. Credit unions are a great financial option to help you save for your loved one’s education. By opening an RESP with a credit union, you can set your child up to have a bright educational future. Not yet a credit union member? Find your nearest credit union here.