A Registered Education Savings Plan (RESP) is a program under which you can save for your child’s education. As parents we try very hard to give our children every opportunity and one of the foundational bricks of many paths in life is education. The cost of post-secondary education increases each year and who knows what our little ones will decide upon for their future but at least there can be something saved to give them a good start.

Why a RESP? A RESP has benefits such as tax sheltered earnings and the Canadian Education Savings Grant (CESG). Although there are rules and criteria, the general concept is that CESG grant will be deposited into the RESP each year amounting to 20% of your annual contributions to a maximum grant of $500 per year. This is a really good thing! While the funds are in the plan, earnings and grant received are not taxed until they are withdrawn from the RESP and at that time they are taxed by the beneficiary – hopefully your child as a student!

Rather than focussing on how much education will cost and how to afford it, I find it easier to concentrate on what we can do and how to do it. In order to obtain the maximum grant, you must contribute $2,500 per year to a RESP. You may wonder how you’ll carve $200+ each month from your budget. I decided to use the $100 per month Universal Child Care Benefit (UCCB), any money I received from relatives and the rest came from our budget. I set aside the money every month via a monthly savings plan. Here are the steps:

• Open a RESP (you’ll need a Social Insurance Number, SIN and Birth Certificate for your child)
• Set up automatic monthly savings contributions

It’s amazing how quickly the savings grow and although I don’t know what they’ll choose to study or if the RESP will cover the total cost of their education, it will be a really good start and a summer or part-time job never hurt anyone! In fact, it’s just the thing to get some life experience and start off their resume.

TIPS:

• Check out the government site for information: Canadian Government RESP Information
• Consider carefully where you set up your RESP – it’s best if it’s with a bank or credit union you already work with.
• Check if there are any restrictions with respect to making changes, transferring the RESP to another institution etc. If there are penalties or fees, go elsewhere.