Open an RESP account as soon your child is born. Based on your income, the government subsidizes your child's RESP each year through the Canada Learning Bond (CLB), even if you don't contribute a cent to the account. The subsidy can be up to $2,000, so don't miss out!
You'll need to apply for a social insurance number (SIN) for your child. And remember—thanks to compound interest, the sooner you start saving, the more you'll save.
There are three types of education savings plans: the individual plan, the family plan, and the group plan. The individual plan has only one beneficiary.
With the family plan, there can be more than one beneficiary. This is a good idea for families with more than one child, since the funds can be transferred from one beneficiary to another, for example, if one of your children chooses not to pursue their education. It's a single plan that requires the contributor to be related to the children, either by blood or adoption.
The third type, the group RESP, is not available at National Bank.
It can be difficult to find the money to make an RESP contribution once a year. A practical solution is to make smaller payments more frequently, such as every week or month. It's much easier on the budget.
You can set up automatic payments so you don't even have to think about it—that's the magic of systematic savings!
The Canadian Education Savings Grant (CESG) adds 20% to the amount you contribute, up to an annual limit of $500 and a lifetime limit of $7,200. This amount is paid directly into the beneficiary's RESP.
If you were unable to contribute in a given year and take advantage of the available grants, you can still catch up: unused CESG contribution room can be carried over to subsequent years. The grant, which ends when the beneficiary turns 17, also offers an additional amount to lower income families.
A number of provinces offer grants that are paid directly into the beneficiary's RESP. In Quebec, the QESI is a grant equivalent to 10% of the contribution up to an annual amount of $250 (and $3,600 total). In British Columbia, a grant of up to $1,200 is available to families saving for their children's education.
N.B.: If the child chooses not to pursue a postsecondary education, the contributions and any interest earned is returned to the contributor, but any grants received must be repaid.
Ready to open an RESP? An advisor can help you come up with the best strategy to save for your child's education and let you know which grants you're eligible for.
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The beneficiary can access the grants and interest in the RESP when they start their postsecondary studies, but the contribution amount is always returned to the contributor —you! It's up to you whether or not you want to put this money towards your child's education.
You can always transfer the funds into an RRSP so you can grow your investment tax-free. Check out our webpage for more information on RRSPs.
Certain other provinces, including Saskatchewan and British Columbia, offer additional grants.