Saving For My Child’s Post-Secondary Education. What is a RESP? #SaveWithRBC

Saving For My Child’s Post-Secondary Education. What is a RESP? #SaveWithRBC

When you are preparing for parenthood there are many things to think about. Do we have space in our apartment/house for a baby? Who will take parental leave? Will I go back to work after having a baby? Can we afford a baby?

Once your baby is born there are many more questions. When should I start feeding her solids? Why isn’t he walking/talking yet? Should we take her to the doctors because of this cold/bump/cough?

The questions continue throughout your child’s life. If you have a kids in high school your questions might also include; will they go into post secondary and perhaps most important –

How will I afford to send my kid to college?

In Canada the best way to save for your children’s education (in my opinion) is an RESP (Registered Education Savings Plan). RESP’s are easiest and most worthwhile if you start early (read in your babies first year) BUT you can still open an RESP – and see its benefits – if your child is in high school. There is more information on the Royal Bank (RBC) website.

Look Ma! I am totally ready for college. I have my hoodie and my skinny jeans I am good to go.

Look Ma! I am totally ready for college. I have my hoodie and my skinny jeans I am good to go.

Why should I open an RESP when I can just save in a savings account?

I have worked at a financial institution for 10 years and I understand many people like the control of seeing their money in a regular savings account. A RESP is a much better choice for a few reasons.

1) You receive free money from the government! I know I should have led with this – Open an RESP and get free money! I will talk more about this below.

2) Your money is safe. It can be used for one child or any of your children depending on how the RESP is set up. To find out which option is right for you contact your nearest RBC advisor.

3) You can save a little or save a lot. The interest rates in Canada are lowest they have been in years and you will (almost) always get a better rate with an investment (like an RESP) then you will with a regular savings account.

Okay, tell me more about this free money.

RESP’s are a registered investment with the Government of Canada. There are a few benefits of the arrangement. First, RESP’s are tax-sheltered (yay!). Second, the government will match up to 20% on the first $2,500 contributed annually, up to $500 a year with a lifetime maximum of $7,500. If you are a low-income family you may be eligible for additional grants.  

But I have zero extra money in our budget. How can I contribute?

My all time favourite reason why I love the RESP we have for our daughter is I do not have to contribute a lot of money to see it grow. Our daughter is almost 2 years old and she has more money in her RESP then we do in our savings. We do not have extra money to contribute on a regular basis. Instead we ask for monetary gifts ($10) at holidays and her birthday. People are more likely to gift a small sum if they know there is somewhere it will go that will be for the child.

What if my son/daughter does not go into university? What will happen with my money?

There are a few different scenarios and the answer will best be answered by your RBC advisor. As a general answer – an RESP is not just for college or university education it can also be applied to apprenticeship, non-credit courses etc. If your child chooses not to pursue any of these courses your contributions are still safe you just might lose out on the government grant money.

This is me in university. I don't look like I care about school debt. BUT after going to college and then university it is on my mind.

This is me in university. I don’t look like I care about school debt. BUT after going to college and then university it is on my mind.

I am pregnant can I set up an RESP now?

In order to start an RESP the beneficiary needs to be a Canadian resident and have a SIN (social insurance number).

Any last minute tips?

We love our RESP. I have a huge load of student debt and will for years. I do not want my daughter to end up with the same. My tip is to start as soon as possible – that way you can enjoy all the great perks an RESP offers. If the beneficiary is born late in the year make sure to open the RESP before the year ends. Our daughter was born in the middle of November and we did not open her RESP until April. We lost out on the government grant for the first year. If you cannot get into an RBC branch before the year is over send a grandparent instead. As long as they have the beneficiary’s information they can set one up.

Disclosure: I am part of the RBC RESP blogger program with Mom Central Canada and I receive special perks as part of my affiliation with this group. The opinions on this blog are my own and not influenced.   

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11 Comments

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