I often hear parents joke and worry about how they’ll pay for their children’s post-secondary education. The cost of education is going up, so this is a big financial stress for many parents. However, it doesn’t need to be. Here in Canada, parents who start an Registered Educational Savings Plan (RESP) for their child can access government grants for that RESP. These grants are added to the parents’ contribution to the RESP and earn investment income until the child needs the funds for their degree.
When she grows up, Sunshine wants to be a marine biologist. Lily wants to be a writer and illustrator. And even though university is still a few years away for them, we’ve already chatted about what they might study. My husband and I talk about where they could go to university, and we’ve started RESPs and applied for these grants for them so they can pay for their future education when they get there.
I received compensation for writing this post on a subject near to my heart; all opinions expressed remain my own.
How to Start an RESP for Your Child
Starting an RESP for your child is easy. You can open an RESP through a financial institution, scholarship dealer or insurance company. My husband and I set up RESPs for Sunshine before her first birthday by booking an appointment at our local bank. Their RESP expert filled out all the paperwork for us and set up an automatic monthly contribution to help the RESP grow.
You can also set up a college savings fund for your child through a private RESP provider. It’s worth taking some time to compare what RESPs options are offered by your local bank and by other RESP providers. Look at what interest rate they offer, who can contribute to the plan (if extended family members want to help out), how your kids will access the funds when they start their chosen program, etc. A few years ago, we transferred our children’s RESP from our bank to an investment firm that offered better interest rates and other benefits.
Starting the RESP for your child will likely involve an hour’s appointment with your bank or RESP provider. Some RESP providers are now offering online options for opening RESPs, which can save you time. After that, you may want to do a quick annual review to make sure that your child’s RESP is growing well. Otherwise, you get to sit back and watch the money grow along with your child!
How to Access Government Grants for an RESP
Once you’ve opened your child’s RESP, you can start applying for provincial and federal grants for your child. Your RESP provider will likely be able to advise you about the grants offered and when you should apply for them. For example, our RESP advisor contacted us just after Jade’s birthday one year to let us know that she was now eligible for a government grant and we should get together to do the paperwork for that.
Here in BC, parents of children born after 2007 can apply for the BC Training and Education Savings Grant. This gives parents $1,200 towards their child’s RESP. You can apply for this grant between your child’s sixth and ninth birthdays. Other provinces offer similar grants, so be sure to ask your RESP adviser about grants available to you in your province.
The Canada Education Savings Grant provides a child with up to $7,200 towards their post-secondary education. This grant matches 20% of a parent’s contribution to the child’s RESP up to $500 per year, so to get the most from the government grant, you’ll want to maximize your own RESP contribution. Again, you can access this grant through your RESP provider. Be sure to follow up with them after applying to make sure that the paperwork was filed correctly and your grant has been deposited.
Access government grants for your child’s RESP usually means simply filling out some paperwork. Some grants are based upon a parent’s contribution (like the Canada Education Savings Grant) and others are simply added to your child’s RESP without any parental contribution. Some grants, like the BCTESG, can be accessed when your child is a certain age and others are not age-dependent.
Start Your Child’s RESP Early!
When I was a baby, my parents invested $1000 in an RESP for me. They never added more to my RESP, but that initial nest egg earned investment income for the next 17 years for me. When I started university, I received $1000 for each of my four years at university. My parents’ investment had quadrupled, and that $1000 per year helped greatly with my tuition costs.
My husband and I also started our kids’ RESPs when they were babies. We’ve been through years when we contributed regularly to the RESP, and years when we’ve had no extra money to throw towards their RESP. We’ve applied for all the grants available, and we’re happy that the girls have a nest egg growing for them. The sooner you can start your child’s RESP, the sooner you can access these government grants for their RESP and the more time your investment has to earn interest and grow for you.
Involve Your Child in Saving for University
Now that Sunshine is twelve, she’s start her first job: babysitting. She’s got that goal of becoming a marine biologist (and she’s done a few things to pursue that interest already). This is a good time to chat with her about her RESP and get her involved in saving for her own education. I believe it’s important to teach our kids about personal finances, and starting investments is part of that.
While my parents never had me contribute to my RESP (and I didn’t even know about it until I started university), they did have me set up other investments in my teens with some of my spare babysitting income. Looking back, I can see how their financial stewardship and good example helped me through university. I was able to complete my first degree without any student loans, thanks to my RESP, my own savings and income, and some scholarships and bursaries.
If your teenager has a regular job, talk to them about putting part of their income aside each month to add to their RESP. It will help them set good habits and goals from a young age, and not just spend all their money on clothes or candy.
Have you started an RESP for your child? Did you benefit from an RESP in getting your degree?