April Fools’ Day is full of harmless fun, like your kids rearranging the kitchen drawers and you finding yourself reaching for a can opener instead of a fork. Or getting an envelope filled with glitter in your mailbox. Whether you’re the unsuspecting recipient or a devious prankster, practical jokes are big on laughs. But jokes aside, you wouldn’t want to be fooled about something as important as saving for post-secondary education to secure your child’s bright future.
It’s no secret that the Registered Education Savings Plan or RESP is Canadians’ go-to education savings tool, largely because of the government matching grants. But there are a lot of myths out there about what RESPs can and can’t do for your family. We’re here to set the record straight on common misconceptions, so at least RESP myths won’t be something you fall for this April 1st.
RESP Myth #1: Only parents can open an RESP
Parents may be the most likely to set up an RESP, but they aren’t the only ones who can do it. Grandparents, aunts and uncles, friends, godparents, your second cousin twice removed… essentially anyone can open an RESP for your child. The type of account you open depends on who the RESP is for, and who you are in relation to the little learner. For example, a family plan is great if you have more than one kid you’re saving for, while an individual plan is perfect if you’re not in the child's immediate family.
RESP Myth #2: An RESP locks you into monthly or yearly contributions
Most RESP companies, including CST Spark, let you contribute whatever amount works best for your budget. You’re not locked into a set amount per week, month or year. This means you can adjust your contributions based on your saving goals. Say you’ve been putting aside $50 a month, but you get a raise, you can easily up that amount to $80 a month. Or if you find yourself with an unexpected tax refund, you can put that money into your RESP as an extra one-time contribution.
RESP Myth #3: You’ll lose your money if your child doesn’t go to university
Imagine you’ve been saving diligently for years, waiting for the day they step foot onto the university campus, and then your aspiring teacher suddenly decides they want to go to chef school and open their own restaurant. Good news, there are plenty of educational programs that you can pay for with an RESP, including at colleges and trade schools. And if after all, they decide post-secondary school isn’t for them, you can withdraw your contributions without penalty, and you may even get to keep growth income—with some conditions.
RESP Myth #4: Grants are only for low-income families
The Canada Education Savings Grant (CESG) is one of the government grants available, and is completely unrelated to your income. With the CESG, the government matches 20% of every dollar you deposit, up to $500 per year, and a lifetime maximum of $7,200 per child. There are also certain provincial incentives, unrelated to income, that add money on top of the CESG. The Canada Learning Bond (CLB) is also available for eligible low-income families with an RESP. Learn more about the CLB here.
RESP Myth #5: RESPs only cover tuition and books
It’s no secret that the cost of post-secondary education goes way beyond tuition and books; there’s everything from transportation, a laptop, giant egg-and-pancake breakfasts to fuel them for the day, and the list goes on. Whether they’re in on-campus housing or living at home while commuting to school by car, their RESP can be used towards any education-related costs, from car insurance to a new desk to cell phone bills to coffee (lots of coffee). All you need to do is show proof of enrollment in a qualifying program.
RESP Myth #6: Your RESP can only be used for schools in Canada
When it comes to using the money from their RESP, your child isn’t bound to study in the Great White North. Whether they’re dreaming of going to the prestigious Juilliard School in NYC to study performing arts, or hopping the pond to study philosophy at Oxford University, the list of accepted international institutions is far and wide, so get ready to help them pack their bags. Then plan a trip to go visit them.
At CST Spark, we’re debunking RESP myths to help more Canadians pay for school
Unfortunately the myths surrounding RESPs are still widely believed, which may explain why so many families still aren’t reaping the rewards of the RESP. According to Statistics Canada, in 2020 about 85% of children with education savings had an RESP. But it begs the question, what’s stopping everyone else from investing in Canada’s favourite education savings tool? With all of the benefits of RESPs, it’s truly surprising that the number isn’t even higher.
It’s easy to save for your little prankster’s future education with CST Spark
We provide no-nonsense, easy-to-understand information about RESPs to help Canadian families become more financially savvy. We offer flexible RESPs, help you apply for the government grants you qualify for, and invest your money with one goal in mind: that you can help pay for your child’s post-secondary education. So go ahead and spend five minutes starting your CST Spark RESP today.
While you might step on a few plastic spiders or put salt in your coffee instead of sugar this April Fools’ Day, at least you didn’t fall for any RESP myths.
Have questions? Visit our website for more info or chat with us, 6 days a week.
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