Investing In Your Child’s Future: Everything You Need to Know About RESPs

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As a parent, you want to do everything in your capacity to help your child achieve their dreams, particularly their educational dreams. One of the best things you can do to set your child on the path to making these goals a reality is to start saving money incrementally for their education as soon as you can to get the best results. Once your child has a Social Insurance Number (SIN), they’re eligible to be the beneficiary of an RESP—so you can start saving right away. 

An excellent tool that Canadian parents have at their disposal is a Registered Education Savings Plan (RESP), a smart savings tool specifically designed to help Canadians save money for their children’s higher education. RESPs are especially useful given the ongoing higher education debt crisis that affects young people attending university.

Are you wondering how to open an RESP? The first step is to learn more about the benefits these savings plans offer. This guide breaks down everything you need to know so you can start making smarter financial decisions for your child’s future.

 

Who Is Eligible to Open an RESP?

You can open an RESP for your child, your niece, your grandson, or any loved one. As the child grows, you put money away in the RESP. When it’s time for them to pursue post-secondary education, they won’t have to worry about anything.

RESPs can also be opened by a single individual or jointly by married couples (including common-law partners). Child care agencies are also eligible to open RESPs for children. 

 

Opening an RESP Is Incredibly Simple

Opening an RESP for your child is extremely easy. All you need to do is follow two simple steps:

1.     Get a Social Insurance Number (SIN) for your child and get one for yourself (if you don’t already have one). There is no charge to get a SIN, but you will need to provide certain documents to complete the application, such as a birth certificate.

2.     Choose an RESP provider that aligns with your needs and goals. All you need is the social insurance number of your child and an RESP application from the financial institution. With CST Spark, you can open an RESP in minutes online. 

RESPs Help You Save In a Variety of Ways

When you open an RESP, you’re gaining the capacity to save money in a number of ways. First, you’ll save money on taxes, since the contributions that you make to your child’s RESP are permitted to grow tax-free in the plan. Additionally, the Government of Canada offers incentives to save for post-secondary education in the form of federal and provincial RESP government grants. For example, the Canada Education Savings Grant (CESG) is accessible by everyone who contributes to an RESP. Families with lower household incomes have the potential to benefit from the Canada Learning Bond (CLB) based on their income and number of children. There are also provincial grants provided in British Columbia (BCTESG) and Quebec (QESI & AQESI). Many RESP providers will automatically apply for these grants on your behalf, as they know which ones you qualify for, making for one less task on your plate.

There Are Several Types of RESPs

When it comes to choosing the right RESP for you and your child, you have a few options to choose from, such as the following:

1.     Family plan – This plan is ideal if you have multiple children as it provides you with the ability to name one or more children to receive the savings. Bear in mind that the children must be related to you by blood or adoption (i.e. children, stepchildren, siblings).

2.     Individual (non-family) plan – If you’re not biologically related to the child you want to save for, this is the plan for you. Under this type of plan, only one beneficiary is named in the RESP and this individual does not have to be related to you.

3.     Group plan – A group plan is for one child only. Under this type of plan, the child can be related to you or not. This type of plan is ideal if you’re able to make regular contributions throughout the term of the RESP. 

Investing in your child’s future is a necessary and important consideration every parent must make. By opening an RESP and familiarizing yourself with the associated benefits, you will set aside the money needed to set your child on the path to success.