Planning ahead

There are a lot of truisms when it comes to parenting – perhaps, none more true than “they grow up quickly.”


One day, your kids are toddlers. The next, they’re off to college or university.

While it’s understandable to get caught up in the moment as a parent, don’t let your child’s future creep up on you without spending some time thinking about how you can lessen the financial burden of their post-secondary education now.

A financial advisor with Edward Jones, Nataliya Tyagley says when it comes to saving for your child’s future, it’s never too early to start.


“Putting money towards your children’s post-secondary education is an important consideration – and the earlier the better, so it has opportunity to grow,” Tyagley says.


A Registered Education Savings Plan (RESP) is a good start. An RESP is a tax-deferred savings account designed to help you save for your child’s future education.


“Tax-deferred means that all earnings on the investments inside the RESP accumulate tax-free until withdrawn. At time of withdrawal, the growth and grant money are taxed in the hands of the beneficiary. When that time comes, usually the beneficiary is a student in a low tax bracket.”


There are two different types of RESPs available – family plans and specified plans. Family plans are designed for families with more than one child, as they allow subscribers to name more than one beneficiary (as long as they are under the age of 21).


“Family RESPs provide flexibility by allowing income, growth and grants – up to $7,200 per beneficiary — to be used by any beneficiary in the plan,” says Tyagley.

Specified plans are single beneficiary RESPs under which the beneficiary is entitled to the disability tax credit for the current tax year.

Tyagley says the Canadian government will also help to fund your child’s post-secondary education through grants.


“The government will provide a Canada Education Savings Grant (CESG) of at least 20 percent on the first $2,500 you save in a Registered Education Savings Plan for your child every year,” she explains.


“Based on your family income and your child’s date of birth, your child may also qualify to receive the Canada Learning Bond (CLB) and additional CESG. If you qualify, the Canada Learning Bond will provide $500 up front and another $100 per year for up to 15 years. The additional CESG could equal up to $100 per year.”


Once the child has graduated from high school and is enrolled in a full- or part-time qualified post-secondary educational program, you can request to withdraw the funds from the RESP to help pay for their studies. 


“Withdrawing funds is a relatively easy process that your financial advisor can assist with,” says Tyagley. “Money can be directly paid to the child or to the subscriber – usually the parent or grandparent.”

Of course, sometimes things come up and you need access to that cash sooner. Tyagley says it is possible to withdraw those funds early.


“We are also quite often asked if funds can be withdrawn from RESP for non-educational purposes, for example, in case of emergency. The short answer is yes, you can withdraw contributions at any time, but grant money will need to be paid back to the government,” she explains.



What is a Registered Education Savings Plan (RESP)?
An RESP is an education savings account that helps you, your family or your friends save early for a child’s education after high school.

What is the Canada Learning Bond?

The Canada Learning Bond is an initial $500 offered by the Government of Canada to help you start saving now for your child’s education after high school. The Canada Learning Bond is money directly deposited by the Government of Canada into an RESP for children of low-income families. You do not need to add any money in the RESP for a child to receive the Canada Learning Bond.

How do I open an RESP and get the Canada Learning Bond and Canada Education Savings Grant for a child?

You can open an RESP at a financial institution, such as a bank or credit union, or through a certified financial planner or a group plan dealer. These institutions, planners and dealers are known as RESP providers.
Step 1 – Get a Social Insurance Number (SIN) for your child. It’s free. Call 1-800-O-Canada (1-800-622-6232), click for more information or visit a Service Canada Centre near you.
Step 2 – Find an RESP provider that offers the Canada Learning Bond. Some RESP providers may ask you to pay for their services, and puts conditions on RESPs, so it is important to ask the right questions and get all the facts to ensure you find the RESP provider that is right for you.


*Source: Canada Revenue Agency