Children’s Education Funds Inc.: An RESP Guide for Parents

Children’s Education Funds Inc

Covering the cost of your child’s higher education can be stressful for some parents, especially at a time when tuition is on the rise in Canada.  However, setting money aside in a Registered Education Savings Plan (RESP) through providers like Children’s Education Funds Inc. (CEFI) can be a financially smart way to ensure your child graduates without a heap of student loan debt.

Here is a general guide to help sort through the different types of RESPs, as well as savings tips to get started.

1) Types of plans

There are three basic types of RESPs: individual plans, family plans and group plans.  An individual plan is an RESP for the use of only one child.  A family plan is more flexible when multiple children of the same household are involved – funds can be applied to each sibling’s tuition as needed.  In order to open a group plan, you typically need to make a minimum deposit.

2) How to sign up

Anyone can set up an individual RESP – parents, grandparents, aunts, uncles, even friends – all that is required is the child’s social insurance number.  Regardless of who sets it up, RESPs are designed for families who are committed to saving.

The good news is if the child decides not to attend school, the money contributed (minus the government contributions) is still yours and can be moved into a retirement plan (RRSP).

3) Know the limits

Parents and any other benefactors can contribute a lifetime maximum of $50,000 towards a child’s education within an RESP. The Canada Education Savings Grant (CESG) will match those funds by 20% to an annual maximum of $500 per year, up to a lifetime maximum of $7,200.  Remember this is per child, not per plan.

4) Invest as early as possible

Although it is best to open an RESP as soon as a child is born, they can be opened at any point – you can even open one for yourself if you have plans to go back to school.  However, government grants are only applicable for those up to age 17.  In order to make the most of the nterest, start the RESP as early as possible, even if it means only contributing a minimal amount to begin with.

5) Withdrawing the money

When it’s time to go to school, the money you’ve saved is returned to you and can be used for your beneficiary’s post-secondary education. The income earned on your investment and the government grants are called Educational Assistance Payments, which are taxable in the hands of the beneficiaries.

Lastly, don’t forget to ask your child’s relatives to contribute money to their RESPs on special occasions like birthdays and holidays.  All of these saving strategies will pay off in the long-run!

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