So, you heard about this thing called an RESP and you want to understand how they work. Fortunately, the process is pretty straightforward and this website (and our Education Savings Specialists) are here to help. Let’s take a look at the key parts of the process.
STAGE ONE: Open an RESP
Opening an RESP is easy. As long as you and the child each have a Social Insurance Number (SIN), the next steps are simple:
- Think about a budget
Consider what you can afford for your initial and ongoing contributions. No matter how much you can afford, or even if you aren’t sure what you can afford, our Education Savings Specialists can help create a plan that is right for you and your family. - Set up an RESP
Our online application takes you step-by-step to get you started with an RESP–and it only takes about 10 minutes. Alternatively, you can schedule an appointment with one of our Education Savings Specialists and they can help answer any questions and guide you through setting up your RESP.
STAGE TWO: Watch your RESPs grow
It’s not quite magic, but the growth you can experience in an RESP can be quite amazing, especially when starting early. Over the course of your savings journey, you can benefit from government grants, investment gains, and compound growth.
Government RESP grants
The government wants you to save for your child’s education, so it rewards you with contribution matches when you save regularly to your RESP. Over the lifetime of your RESP, the government gives you 20 cents on every dollar you save, up to $7,200 per child, or even more in some provinces or income brackets.
As part of our commitment to you, Embark applies for all eligible grants on your behalf, including provincial ones: one less thing for you to think about! Our Education Savings Specialists also work with you to maximize RESP grants, so you don’t leave any eligible contributions on the table.
Let’s have a look at the types of grants that are available.
Canada Education Savings Grant
The most popular and well-used government grant is the Canada Education Savings Grant (CESG). With the CESG, the Government of Canada provides up to $7,200 per child over the lifetime of your RESP. You will receive 20% of your annual contributions (up to $500 per year) on the first $2,500 you contribute.
In addition, if you are in a modest income bracket, the Additional Canada Education Savings Grant (A-CESG) can add 10-20% more on the first $500 that you contribute each year, up to an extra $100 annually. It’s a great boost to help you reach the maximum $7,200 grant!
Canada Learning Bond
The Canada Learning Bond (CLB) is a government grant that helps modest-income families save for their children’s education. Through the CLB, the Government of Canada kickstarts your savings with a $500 contribution followed by $100/year until your child reaches 15 years of age (based in part on family net income and number of children.) No additional money needs to be added to your child’s RESP to receive the CLB, as long as you’re eligible. Of course, even if you are eligible for the CLB, you are still encouraged to contribute your own savings to capitalize on additional government grants, such as the CESG. If you are in a modest income bracket, you are highly encouraged to apply for the CLB and A-CESG when you open your RESP.
British Columbia Training and Education Savings Grant
Residents of British Columbia can earn more with the British Columbia Training and Education Savings Grant (BCTESG), a one-time grant that provides parents with an additional $1,200 for each child born after January 1, 2006. No matching or additional contributions are required. You just need to apply for this grant when your child is between the ages of 6 and 9.
Quebec Education Savings Incentive
The Quebec Education Savings Incentive (QESI) is a refundable tax credit program offered by the Government of Quebec. If eligible, you will receive a grant for 10% of your annual RESP contributions – up to $250 per year, with a lifetime maximum of $3,600 per child. Depending on your income, you can earn an extra 5-10% of the first $500 contributed each year.
Compound Growth
The earlier you start saving for your child’s education with an RESP, the earlier you can start taking advantage of compound growth.
What is Compound Growth?
Think of it as a financial “snowball effect” that occurs when you put your money in an investment that earns a return/income, and then your earnings are reinvested. When you continually reinvest your returns to produce even greater ones, that’s compound growth. This benefit is something you can take advantage of during the entire life of your RESP. The longer you invest your money, the greater the opportunity for growth.
Starting Early Means Saving More
If you start saving when your child is born or at an early age, the greater timeframe will allow you to save more money for their education. With an RESP, you don’t just benefit from compound growth on your contributions — you also benefit from compound growth on the government’s contributions. Starting early can really pay off!
Your Ongoing Contributions
The amazing benefit of government match contributions aside, it’s your ongoing contributions that are the foundation of a successful RESP plan. Having the determination to routinely save for your child’s education is the first step and we are here to help you see it through. At Embark, we understand that life isn’t a straight line and that your capacity to contribute can change over time. That’s why our Education Savings Specialists are committed to creating a plan that is right for you at the time of setup, and then adjusting it as things change.
Automate Your Savings:
With a pre-authorized contribution plan, you can:
- Set-up weekly, biweekly, semi-monthly, or monthly contributions (your choice). Based on that schedule, your contributions will be automatically transferred from your bank account.
- Increase, reduce or pause your contributions, at any time.
STAGE THREE: Use Your RESP
When the time comes to use your RESP savings for its intended purpose (your child’s post-secondary education) you may wish to withdraw funds from the RESP to pay tuition, room and board, school supplies, and other student expenses.
It pays to know how to withdraw strategically from your RESP, so that you can withdraw funds effortlessly and minimize tax on the income that grew in your RESP over the years. To help you with this process, we have created a dedicated section called Withdrawing from your RESP which dives into all the particulars of the withdrawal process, timing, taxation, and more.
Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.
