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 occasion, 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 35 th year. Simply put,
this flexibility offers your loved one plenty of time to make thoughtful decisions about
their academic future.


Here are a few helpful hacks to maximize your savings for your child’s RESP:

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.