Investing in the Future: The Power of RESPs for Your Child's Education

Shawn Martel Pl. fin., CIM - Sep 21, 2023

As a parent, grandparent, godparent, or caring individual in a child's life, you have dreams for their future. You want to see them succeed, and one significant way to help ensure their success is by investing in their education. That's where the Registered Education Savings Plan (RESP) comes into play.


In this blog post, we'll explore what RESPs are, why they are a smart investment, and the benefits of opening one for the child in your life.


Understanding RESPs


An RESP is a government-approved savings plan designed specifically for educational purposes. It allows you to save money tax-free and even receive additional grants from the Canadian government to bolster your savings. The primary purpose of an RESP is to provide financial support for a child's post-secondary education, whether they choose to attend a university, college, trade school, or pursue other eligible educational programs.


The Benefits of Opening an RESP:


  1. Tax-Advantaged Growth:
    • One of the most significant advantages of an RESP is tax-deferred growth. The money you contribute to the plan grows tax-free until it's withdrawn to pay for educational expenses. This means that your investments can compound over time without the drag of taxation, helping your savings grow faster.
    • With a lifetime contribution limit of $50,000 per beneficiary, this is an excellent strategy to use to take advantage of tax-deferred growth.
  2. Government Grants:
    • The Canadian government offers incentives to encourage education savings through RESPs. The most well-known of these incentives is the Canada Education Savings Grant (CESG). With the CESG, the government matches a portion of your contributions, effectively providing free money to boost your savings. Depending on your contributions and income level, you can receive up to $7,200 in CESG for each child.
    • If you reside in Quebec, you have access to the Quebec Education Savings Incentive (QESI), which complements the CESG. The QESI is a provincial grant designed to encourage education savings for Quebec residents. The QESI provides a refundable tax credit of up to 10% on annual RESP contributions, depending on family income. Families with lower income levels can receive a higher credit rate, making it even more attractive for those who may need it most. The QESI can provide a substantial boost to your education savings efforts, making it a valuable addition to your RESP strategy.
  3. Flexible Educational Options:
    • RESPs offer flexibility when it comes to the type of education your child can pursue. Whether they choose a traditional four-year university program, college, trade school, or even part-time studies, the funds in an RESP can be used to cover a wide range of eligible educational expenses. This flexibility ensures that your child can follow their unique educational path.
  4. Transferrable Among Beneficiaries:
    • RESPs are versatile in another crucial way. If the child initially named as the beneficiary decides not to pursue post-secondary education, the plan's funds can be transferred to another eligible beneficiary, such as a sibling. This feature ensures that your savings won't go to waste and can benefit other children in your family.
  5. Stress-Free Educational Funding:
    • With an RESP, you can approach your child's educational funding with confidence. You'll have a designated pool of money earmarked specifically for their education, making it easier to manage and allocate resources when the time comes.
  6. Financial Security for Your Child:
    • By opening an RESP, you provide your child with a significant financial head start. They won't be burdened with heavy student loans or be forced to work excessive hours while studying, allowing them to focus on their education and future success.
  7. Cultivating a Savings Culture:
    • Beyond the financial benefits, RESPs can instill a savings culture in your child. Knowing that their education is being financially supported can motivate them to take their studies seriously and value the investment made in their future.

Getting Started with an RESP:


Opening an RESP is a straightforward process. You can choose from various financial institutions, such as banks, credit unions, or investment firms, to open the plan. Here are some key steps:


  1. Select a Plan Provider: Choose a reputable RESP provider, like our team at Assante, that aligns with your financial goals and preferences.
  2. Choose Investment Options: Decide how you want to invest the money within the RESP. You can opt for guaranteed income certificates (GICs), mutual funds, stocks, or a combination of these options.
  3. Set a Savings Goal: Determine how much you want to contribute to the RESP regularly. The key is to make consistent contributions over time.
  4. Maximize Government Grants: Ensure you maximize your access to government grants by contributing the amount that receives as much of the eligible annual amount of CESG & QESI.
  5. Monitor and Adjust: Periodically review your RESP's performance and make adjustments as needed to stay on track with your savings goals.

In Conclusion:


Investing in an RESP is not just about saving for education; it's about investing in the future and giving the child in your life the best opportunities possible. By taking advantage of tax-advantaged growth, government grants, and the flexibility an RESP offers, you're providing a strong foundation for their educational journey. An RESP isn't just an investment; it's a gift of knowledge, empowerment, and financial security for the next generation.


If you are interested in opening an RESP or would like a second opinion on your current RESP, please feel free to contact us.