A Registered Education Savings Plan (RESP) is an effective way for family and/or friends to save toward a child’s education. It offers tax benefits and allows you to take advantage of special grants. There are different kinds of plans to choose from, so it is wise to shop around.
RESPs Plans:
There are 3 basic types of Registered Education Savings Plans (RESPs): Individual Plans, Family Plans and Group Plans. An RESP is a special savings plan that can help you, your family, or friends save for a child’s education after high school.
Individual Plans: Any one can open an individual RESP and anyone can contribute to it. This includes parents, grandparents, aunts, uncles and friends. You can even contribute to an individual plan for yourself.
Family Plans: Can have one or more beneficiaries (student), but each beneficiary must be related to the contributor. The beneficiaries must be under 21 when they’re named. Contributions can only be made until a beneficiary turns 21.
Group Plans are also known as Pooled Funds: Offered by Group Plan Dealers and known as Scholarship Trusts. Each plan has its own rules. There are both pros and cons of this type of plan versus the individual or family plan.
Service Fees: Some RESP providers charge service fees and some do not. Some may also limit the amount of money you can put into a plan and tell you how often you can contribute.
Other things to consider: How long before your child goes on to post secondary education? This factor may help you decide what kind of plan to choose.
What you need to know
- Some plans require automatic or monthly deposits and some don’t.
- Plans with minimum monthly deposits have different minimums.
- Some plans have service charges and some don’t.
- Some plans invest in GICs/savings accounts, while others invest in the stock market which is more risky.
- You need to consider how much risk you are willing to take.
- Some plans have consistently shown better annual returns (more $ in your RESP) than other plans
Benefits of RESPs:
- No taxes are charged on the interest earned while it is in the RESP plan so your money will grow faster.
- No Bank Account: You don’t need to have a bank account to open up an RESP
- No Money to put in a Plan: You do not need to deposit any money into a plan to potentially qualify for the $2,000 Canada Learning Bond
Easy access to Government Grants:
- Opening an account could qualify you for the Canada Learning Bond ($500 in the first year and then $100 annually for fifteen years).
- Making a deposit could qualify you for up to $500 in Canada Education Savings Grants.
- Residents of Alberta can qualify for up to $800 Alberta Centennial Education Savings Plan.
Where do I open an RESP?
You can open an RESP through banks, credit unions, mutual fund companies, investment dealers and scholarship plan dealers
What do I need to open an RESP?
Birth Certificate for your Child
If your child was not born in Canada, a citizen certificate or a permanent resident card is acceptable.
Social Insurance Number for you and the child
Only $1 is needed to open an RESP
How do I apply for a social insurance number?
Visit your local Service Canada Centre or go to www.servicecanada.gc.ca
How do I apply for a birth certificate?
Differs from Province to Province: check with your local Independent Living (IL) Centre or your provincial government.
Solutions
- ILSM is here to provide information and assistance.
- Get a Birth Certificate for your child and Social Insurance Number Cards.
- Bring one Looney ($1) with you to open the account.
- Go to financial institution of your choice (bank, credit union, or group plan dealer).
- Be informed and ask questions.
- Go to government websites to learn more. One good site is http://www.hrsdc.gc.ca/en/learning/education_savings/index.shtml
For more information download the detailed information sheets from the link below
