RESP Insights

How do RESPs work?


Starting to research saving for your child’s education?

There’s a lot of information out there. That’s why we’ve put together an easy how-to guide for a great education savings tool: the Registered Education Savings Plan (RESP).

An RESP has a ton of benefits—like government grants and tax-sheltered growth—that help you save for a child’s post-secondary education.

Let’s walk you through an RESP from start to finish to see how it works.

Opening an RESP

The very first step to opening an RESP is getting your child set up with a Social Insurance Number.

Next, you’ll want to choose an RESP provider. Most financial institutions, like banks and credit unions, offer RESPs as part of their services. Some providers, like CST Spark, focus their business exclusively on RESPs. You can log on to CST Spark and open an RESP account in about 10 minutes!

There are three different kinds of RESPs: individual, group, and family. Which type you choose depends on who you’re saving for and how you’d like to invest your money. Individual plans are popular if you’re saving for one child and are looking for a flexible plan, but a group or family plan could be right for you, too.

Regardless of which plan you choose, an RESP gives your child the freedom to choose the post-secondary education that’s right for them, including university, college, international academies and more.

Watching your RESP grow

Now that your RESP is open, it’s time to start putting in some money.

Some plans have minimum contribution requirements but some only need as little as $10 to begin, and have flexible contribution schedules. No matter what kind of plan you open, lifetime contributions top out at $50,000 per child.

With any plan, there’s no need to worry about taxes. Your investments grow tax-free while in your RESP.

Investment income isn’t the only way your plan grows. Contributing to an RESP can also qualify you for the Canada Education Savings Grant (CESG). The CESG matches 20% of your investment, up to $500 a year and $7,200 over the life of the plan.

There are plenty of additional grants beyond the CESG. It’s always a good idea to check if you’re eligible for provincial or income-based grants.

Withdrawing from an RESP

You’ve maximized your contributions, received all of your government grants, and watched your investments grow. What happens when your child finishes high school?

First, they don’t need to rush to make a decision on their future. RESPs can stay open for up to 36 years!

Once they head to post-secondary, you’ll be able to start withdrawing money from the RESP to help them with important stuff like tuition, books, food, and more.

But what happens if they decide not to enroll in post-secondary? Depending on the plan, you can transfer the savings to another child. Or, you can close the RESP. In this case, you can recoup your contributions. You may even be able to get back your investment earnings, too, with some conditions and subject to tax.

Now that you understand the way an RESP works; it’s time to learn about an easy-to-use solution. See how the flexibility and personalized approach of CST Spark’s Bright Plan could be right for you.

Bright Plan is only sold by Prospectus.  Download Prospectus

An RESP helps you save for tomorrow, today
It’s difficult to predict just how much tuition will be when your child or grandchild goes to university or other post-secondary education, but
it’s a safe bet it’ll be even higher than it is today. That’s why it’s important to start saving early, as the earlier you start, the more time you have to save.

In addition to the Canada Education Savings Grant (CESG), there are other grants you may be able to take advantage of as well, including the Canada Learning Bond and several provincial educations savings incentives.

What is an RESP? A tool that empowers your child to dream big
Life goes by quickly. Your kids will soon be amazing you with what they’ve achieved. Seemingly overnight, they’re going from crawling to walking, from first day of school to driving test.

You want to make sure you’re giving them every opportunity along the way to spread their wings and fly to whatever destinations await them.

An RESP is a great way to ensure they’ll have that support should their dreams include a post-secondary education.

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