Choosing the Right Registered Education Savings Plans for Your Child
When my daughter was 4 months old, we started looking at our options to choose the right type of Registered Education Savings Plans for her. Anyone can pretty much open an RESP for a child. It can be the parents, grandparents, other family members, and friends of the child. We opened an RESP for our daughter, and her paternal grandparents also contributed once with a lump payment. RESP’s can be opened by one individual, or opened jointly by spouses or common-law partners. To get started on opening an RESP, you will need to get a Social Insurance Number (SIN) for your child. There is no fee, but you will need to show certain documents such as a birth certificate to be able to acquire one.
It’s important to ask these questions below when meeting with a representative:
- Do I have to put a minimum amount of money into an RESP?
- Are there any fees to pay once I open an RESP? If yes, how much will I have to pay and what are they for?
- Do I have to make regular payments?
- Can I change my contribution amounts?
- Can I withdraw any money if I need to?
- Are there any fees or penalties for withdrawing money early?
- What happens if my child decides to only study part-time at a post secondary education?
- What happens to my savings in the RESP if my child does not continue his education after high school?
- Do you limit the types of educational programs my child can attend?
- What are my investment choices?
- Can I lose money on my investment?
- Can I transfer the RESP to another person? If yes, is there a cost?
- What happens if I close my RESP early?
The Family Plan or the Group Plan
We looked at two plans upon deciding for an RESP: the family plan and the group plan.
With the family plan, you can name one or more children to receive the savings when they need to pay for their post secondary studies. The earnings can be shared among the children, and the Canada Education Savings Grant can be used by any beneficiary named in the RESP. Your financial institution or a certified financial planner can help you answer questions related to this plan.
The group plan is for one child only. You have to make regular payments for the duration of the RESP term. Your savings are combined with other people that are contributing. The payout at the end will depend on how much money is in the group account and on the number of children that are the same age as your child (same school year).
After reviewing our options, we decided to go with a group plan by Canadian Scholarship Trust Plan. This is our personal decision (not everyone will agree with our choice), but at the end it worked well for us. We thought they offered a good return on our investment. Well, 18 years later, we receive a letter in the mail to start the process to request money on her behalf to pay for her University studies. How does time fly so fast! They sent us one cheque made out to my husband’s name for the amount we had contributed to her group plan, and we also got %100 back on our enrollment fees, while she received one for the interest that was made on our contribution. She will get a cheque each year for the next three years to pay for her studies.
Do you have an RESP set up for your child(ren)?