Maximizing your Child's RESP

Father reading to his daughter

Having a child is a life-changing event, and gives parents a lot to plan for. One thing parents should be planning for is their child’s education. While post-secondary education is in the distant future, starting early will allow you to give your contributions time to grow, giving your child as much money as possible to contribute to their education.

“You should absolutely start a Registered Education Savings Plan (RESP) as soon as possible,” says Crystal Brown, Wealth & Retirement Advisor at Cambrian Credit Union. You are eligible to open one for your child as soon as you have their Social Insurance Number.

Brown recommends trying to contribute at least $2,500 annually to your child’s RESP. “The government offers a 20 per cent grant for the first $2,500 in contributions that you make annually up to a lifetime maximum of $7,200,”she says. The money in an RESP grows on a tax-deferred basis, and you can contribute a maximum of $50,000 per child. Looking to save more for your child? Contributing to your TFSA is another option to save for your children, as well.

Setting up pre-authorized RESP contributions is an easy way to ensure you’re saving for your child’s education. “If you’re invested in the market in mutual funds, regular contributions allows you to take advantage of dollar cost averaging, lowering the average cost of shares, making the most out of your investments,” Brown says. Other RESP savings options include Guaranteed Investment Certificates (GICs) or a high interest savings account.

Lower income families may also qualify for the Canada Learning Bond, which is money that the Government of Canada deposits into your child’s RESP. Children born after January 1, 2004 are eligible, based on the number of children and adjusted income of the primary caregiver.

When it comes time to withdraw money from an RESP to pay for tuition, all you need is proof of enrollment at a qualifying institution. “Most universities and trade schools qualify,” Brown says.

For more information about RESPs, make an appointment with a Cambrian Wealth & Retirement Advisor