I Love Back to School Season… and Here’s Why
August is here, and I have to admit… this is one of my favourite times of year.
Why? Because I get to process all the RESP (Registered Education Savings Plan) withdrawals and see years of planning pay off as students start their post-secondary journeys, debt-free. There’s nothing more rewarding than watching families I’ve worked with reach this milestone, knowing we’ve given their kids a financial head start.
What is an RESP?
An RESP is a special savings account designed to help Canadian families save for their children’s post-secondary education. The government created it to encourage education savings, and it comes with some incredible benefits you don’t want to miss.
How Does an RESP Work?
Contributions: Parents, grandparents, or even family friends can contribute money to the plan.
Government Grants: For every dollar you contribute, the government matches 20% (up to $500 per year per child), with a lifetime maximum of $7,200 through the Canada Education Savings Grant (CESG). Some families may qualify for even more through additional grants.
Tax-Deferred Growth: Your contributions grow tax-free while in the plan. When your child withdraws the money for school, they pay the tax… not you. Since most students have little or no income, the tax bill is usually minimal.
Why Use an RESP for Education Planning?
1. Free Money from the Government
Ignoring the CESG is like leaving money on the table. If you’re saving for your child’s future, why not take advantage of the government’s help?
2. Tax-Advantaged Growth
RESPs aren’t just a savings account, they’re an investment account. The funds you contribute can be invested in stocks, bonds, mutual funds, or ETFs, which means your money can grow even faster. This investment growth, compounded over years, can make a huge difference when tuition bills arrive.
3. Flexibility
RESPs aren’t just for university. They can be used for college, trade schools, or other qualifying programs in Canada and abroad. If your child decides not to pursue post-secondary education, you still have options for the funds.
4. Setting Your Child Up for Success
The best part? Students can focus on their studies instead of worrying about debt! I’ve seen firsthand how empowering it is for families to know their children can start building their adult life with a clean financial slate.
Rules to Remember
Contribution Limit: Lifetime maximum of $50,000 per child.
Grant Limit: Maximum $7,200 from the CESG.
Withdrawals: When your child is enrolled in a qualifying program, you can start withdrawing funds. The original contributions come out tax-free, while the grant and growth portions are taxed in your child’s hands.
Time Limits: You can keep the RESP open for up to 36 years, so there’s plenty of time if your child takes a gap year or two.
My Pro Tip
Don’t just let your RESP contributions sit as cash! Invest those funds for growth. The earlier you start, the more time your money has to work for you. Even small, regular contributions can add up to a big advantage by graduation day.
Ladies, if you’re ready to start planning your child’s future or have questions about your RESP strategy, I’m here to help. Let’s make sure your family gets every dollar, and every opportunity, they deserve.
Which part of the RESP process do you find most confusing? Drop your questions below or book a call… I love helping families unlock the full power of education savings!
