As summer draws to a close and the kids are back in school, we’d like to encourage and inspire you to start early with planning for your child or grandchild’s post-secondary education.  It might seem crazy to start saving for College, University or an Apprenticeship program while the little ones have not even started elementary school; however, let us tell you it is never too early to start.  Education costs for kids attending school (tuition, housing & supplies) are typically between $20,000 and $25,000 per year in 2022.  At this time of year as we process RESP withdrawals for our clients, we are always amazed at how much you can accumulate in a RESP over the years by contributing enough to receive the maximum FREE matching amount from the government.

Starting in the year that your child or grandchild is born, you can contribute up to $2500 per year and receive a 20% matching grant from the Canadian federal government called the Canada Education Savings Grant (CESG).  Depending upon your family’s income level, there is another grant and bond that you may be eligible for.  Each child could receive up to $7200 of free CESG, plus any additional grants and bonds.  You are able to play catch up each year for one year (you can contribute $5000 in any one year that you have room to catch up).  Keep in mind the deadline is December for the annual contributions.

You can choose to open an individual RESP per child, or a family RESP where the money can be shared amongst all of the children.  Contributions into a RESP account are not tax deductible; however, they do grow tax free until the time of withdrawal. 

Flash forward to age 17 when the now young adult is ready to head off post-secondary school.  With proof of enrolment, the beneficiary of the RESP can withdraw funds for schooling costs as needed.  The contributions into the RESP come back out tax free.  The growth and grant portion are taxable in the hands of the beneficiary/student at their tax rate (typically lower than the parent or grandparent’s tax rate).

The above is just an overview of RESPs, and how beneficial they are in helping to cover today’s expensive cost of education.  As with any government subsidized program, there are a number of rules and restrictions to be aware of, but they are quite manageable.  Additionally, there are a couple of estate planning tips to be followed when RESPs are created.  RESPs are quite easy to set up and all that is needed is a Social Insurance Number for your child or grandchild.

If you are interested in taking advantage of the 20% matching government grant to help save for your child’s or grandchild’s education, please reach out to us to discuss RESPs in more detail.