Make the Most of Your Registered Education Savings Plan (RESP)

Planning for your child’s education is crucial. A Registered Education Savings Plan (RESP) is a valuable tool that helps families save for post-secondary education. By investing in a RESP, you can ease the financial burden of education and provide your child with a solid financial foundation for their academic journey.

So, what exactly is a RESP?

It’s a government-approved savings plan that helps Canadians save for post-secondary education. RESPs benefit from government matching grants, offering up to $500 per year and a lifetime maximum of $7,200 per child. With its tax-deferred growth and government incentives, your savings will have the potential to grow significantly to prepare for your child’s future, so they can focus on their studies and not student debt.

To make the most of this opportunity, it's important to fully utilize the government grants and maximize the growth of your education fund.

Here’s some tips to help you maximize your RESP savings:

1. Understand the Basics.

A RESP is a tax-advantaged savings account designed to help Canadians save for post-secondary education. Contributions are not tax-deductible, but investment earnings grow tax-deferred until the money is withdrawn. Additionally, the government offers incentives including the Canada Education Savings Grant (CESG) which offers 20% matched contributions, and for eligible families, the Canada Learning Bond (CLB) offers additional support.*

* Canada Education Savings Grant (CESG) has an annual maximum of $500 with a lifetime maximum of $7,200. The Canada Learning Bond (CLB) is available for eligible families and offers a lifetime maximum grant of $2,000 *

2. Invest Wisely.

Choosing the right investments within your RESP can significantly impact your savings potential. Consider a diversified portfolio that matches your risk tolerance and goals.

There are a variety of investment options for you to consider:

1. Regular savings account
2. Term deposit or GIC
3. Mutual Funds
4. Stocks
5. Bonds
6. And other eligible investments

3. Every Bit Helps.  

While contributing the full $2,500 annually is ideal for maximizing government grants such as the CESG ($500 maximum per year), remember that every bit helps. Regular, smaller contributions are often more manageable and can add up over time, especially with the added benefit of government grants.

4. Automate Regular Contributions.

Set up automatic contributions to ensure you consistently add to your RESP. You can choose to contribute weekly, bi-weekly, monthly – plus you can change, pause, or stop at any time.

5. Maximize Government Grants.

Ensure you contribute enough each year to capture the maximum grant and consider making catch-up contributions if you missed previous years.

• Canada Education Savings Grant (CESG) matches 20% on contributions up to $2,500 per year per beneficiary, which equates to a maximum grant of $500 annually ($1,000 with carry forward). 
• The maximum lifetime grant over 15 years is $7,200.

6. Start Early. 

The earlier you start contributing to a RESP, the more time for your investments to grow. If you start when your child is an infant, you’ll benefit from many years of growth, making a significant difference in the amount available when they start post-secondary education.

7. Consider Contributions in High-Income Years. 

If you have a high-income year or a tax refund, consider making larger contributions to your RESP. Any amount or even one-time contributions can help you secure a portion of the grant money available from the government.

8. Connect with a Financial Advisor.

For personalized advice tailored to your financial goals, consider contacting a financial advisor. They can provide insights into investment strategies, tax implications, and optimal contribution levels to help you make the most of your RESP.

Every contribution to your RESP, no matter the amount, plays a crucial role in building a secure financial foundation for your child's post-secondary education. By starting with what you can and taking advantage of available government grants, you’re leveraging an efficient tool to invest in their future success.