RESPs: What you should know

what you should know about RESPsIt’s no secret that the cost of a university education continues to increase every year. Planning for your child’s education now allows you to save as much as possible to give them a step up when it comes to post-secondary costs.

What is an RESP?

RESP stands for Registered Education Savings Plan. These are plans that allow parents to put aside money for their child’s education. RESPs aren’t limited to just a child’s parents. Any adult is able to open up and contribute to an RESP on behalf of a child.

The first iteration of an RESP dates back to 1974. The program was overhauled in 1998, with the Canadian government now contributing to RESPs as well through the Canadian Education Savings Grant (CESG). Some provincial governments also contribute to RESPs through various savings grants.

You can open up and RESP through most financial institutions and some scholarship dealers as well.

Are there any restrictions?

As mentioned above, anyone is able to open and contribute to an RESP. However, there is a lifetime contribution limit of $50,000. While there is no annual contribution limit, CESG can only be received on the first $2,500 contributions per year.

These are some of the general restrictions that apply to all RESP accounts. Individual RESP providers may have different requirements, so be sure to do your research when choosing a provider.

When should you start saving?

As with any type of financial planning, the sooner you start saving the better! Contributing to an RESP early on will ultimately lead to your child having more money saved up for their education. You can contribute to an RESP for up to 31 years after it’s been opened, providing plenty of time to accumulate savings.

There’s no time like the present to start thinking about saving for your child’s education. Liu and Associates offers personal financial planning services to help you reach your goals in a timely and efficient manner. Make an appointment with one of our accountants today!