How do I setup an RESP for my Child?


Each year the cost of an education for your child becomes more and more expensive. An RESP can offset those costs. Let's look at the process of selecting and opening an RESP.

A registered education savings plan (RESP) is the most effective way to save for your child’s post secondary education or any eligible beneficiary that you wish to assist in continuing education. The total contribution limit is a maximum of $50,000 per child and the money will grow without any tax burden as long as it stays within the plan. Although the contribution does not qualify as an investment rebate for tax purposes, it has many benefits. An RESP often qualifies for an additional government grant of up to $500, which can add up to $7,200 lifetime when the beneficiary turns 17. The Government grant may vary based on the province the beneficiary resides in. The process to setup an RESP is as follows:

Request a Social Insurance Number for your child

Receiving a social insurance number for your child is the first step to setup an RESP and will be requested by any agent you chose to work with.

Familiarize yourself with different RESPs

There are three types of RESPs: individual, family and group. You can set up an individual plan to pay for a single child’s education costs, either through an RESP provider, investment adviser at your bank, a mutual fund sales rep or an independent financial adviser. Some plans will require minimum investment commitments, which you should be aware of and consider before setting up an RESP.

Understanding the Differences Between RESPs

Different types of RESPs have different benefits and parents can choose the one that best suits their needs.  For example, some parents want to hold a family or individual RESP so they can control the investment options. Family or individual RESPs can be invested into savings accounts, GICs, mutual funds, exchange-traded funds, stocks, and corporate and government bonds.

A group plan is ideal for parents who want to make regular payments throughout the term of the RESP. In this type of plan, your savings are combined with those of other people. How much each child gets depends on how much money is in the group account, and on the number of students of the same age who are in school that year.

Decide How Much and How Often You Want to Contribute to an RESP

The growth of your RESP will depend upon the  amount invested and the success of the investment. While family and individual RESPs can take in money from various sources at different times, a group plan investment may benefit from the pooling of investment from those in the plan. Again with Canadian Education Savings Grant (CESG), if you are able to invest $2500 per year, you will be qualified for a full government grant of $500 which may provide you with a 20% return.