How to Save for your Child's Education with an RESP

March 26th, 2012 Leave a comment Go to comments

One can never start saving too early for their child's education.  An RESP can even be opened for a newborn, as long as he or she has a Social Insurance Number.  Once you've opened an RESP, you'll be eligible for many government grants, such as the Canada Education Savings Grant (20% of your contributions up to $500 per year and a lifetime maximum of $7200), the Canada Learning Bond ($500 first year plus $100 subsequent years, if you qualify for NCB supplement), and several provincial grants.

Our recommendation is that you open an RESP - and hold any investments for that matter - with a reputable financial institution that will tell you their fees up front and will treat you fairly if you wish to withdraw money or your child doesn't pursue post-secondary education.

If you'd like to spend a little time on this project and pay some of the lowest fees in the industry, consider a Couch Potato Portfolio with TD e-Series funds.  (Note that TD Mutual Fund accounts are not eligible to receive the Canada Learning Bond, the ACESG, and some provincial grants, but you can open a second RESP with TD Canada Trust for this purpose.)

On the other hand, if you'd like to receive some professional advice, contact a financial advisor at a reputable financial institution, and be sure to Google the name of the institution to check out their reputation beforehand.  You'll pay slightly more fees than with a self-directed approach, but with a reputable financial institution, they will be appropriate based on the level of professional service you'll receive.

If your child decides not to attend post-secondary education, the government contribution to your RESP must be returned, but the interest earned may be transferred to an RRSP, tax-free.

We feel it important to mention Group/Pooled/Scholarship RESP Plans, such as Heritage and Canadian Scholarship Trust.  To say these plans have a less than stellar reputation online would be an understatement - the internet is filled with stories from people who couldn't make their regular payments and therefore lost all their past contributions, or even people who did everything right and still lost a few percent, after ten or more years of contribution, due to exorbitant fees.  This illustrates how important it is to do your research, especially when considering something as important as your child's financial future.

We also recommend you ask any prospective RESP provider these questions, courtesy of

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