Financial literacy coach Beverly Wilks shares tips on how an RESP can help you save toward your child's post-secondary education.

Ottawa

Covering the costs of post-secondary education can be challenging for families, but registered education savings plans (RESPs) offer a structured way to save. Financial coach Beverly Wilks explains that RESPs allow contributions from parents, relatives, or friends, with a lifetime contribution limit of $50,000 per child. The federal government also supports these savings through the Canada Education Savings Grant, which can add up to $7,200 per beneficiary.

If a child does not pursue post-secondary education, RESP funds can be transferred to another child in a family plan or, under certain conditions, rolled into a registered retirement savings plan (RRSP). Any government grant money must be returned if the beneficiary does not attend eligible programs. Wilks recommends consulting a financial advisor or bank to understand fees and rules before setting up an RESP.

How you can save money for your child's education

Putting a child through post-secondary education can be expensive. Tuition, books, living expenses. So how do families cover all of that without going deeper into debt? Well, a registered education savings plan, or RESP, can help. Beverly Wilks is a financial coach and blogger of Bacon & Heels. So good to see you again. Thank you. Glad to be here. Thank you. You are here to explain all of the questions that folks may have about RESPs. They've been around for a long time, but what exactly are they? So it's a great tax deferment for you to save money for a child's education. So it's really beautiful. It's a great way to get money aside when the child is young. So you can start as soon as the child is born up until the child is 18 years old. You can contribute money to a fund to help pay for their higher education. And it doesn't just have to be parents either, right? Exactly. So it could be an aunt or an uncle. It could be a grandparent. It could be a family friend that would like to contribute to this child's education. Okay. So this is not just a bank account where you're saving money. It actually gains. It's an investment. It's an investment. And how does that work? So there's two things. So one, the person who is providing the money, the subscriber, the child is called a beneficiary. So you open up an account. You're allowed to put up to $50,000 for this child. And what's great about this is as the child is young, it's going to be accumulating interest along the way. And the federal government has also provided a plan called the Canada Education Savings Grant. A bit of a mouthful. And they provide up to $7,200 for this child to go to school. Okay. So that really adds up over time, right? Exactly. Exactly. What happens if your child doesn't go to school, though? So it's not all bad. If you have a family plan, which is a RESP for more than one child, let's say of two or three children, must be part of a family, you could transfer that money to the second eldest or third eldest child, whoever you have in your family. Oh, okay. That's great. Number two, if the child says, nope, I'm not going at all, you don't have a second or third child, then you could take that money out. And what you put in could go into your RRSP as long as you have room. So you've got to check your room contribution limits. That's very important. And then at the very least, all the money that you have accumulated from the government, and Brian mentioned $7,200 up to you could get, that money will have to go back to the government. Okay, so that money has to go back to the government. But otherwise you can take out everything that you've invested. You invested. And any gains that you made, that will be taxable income. Okay. Now, I talked about what if your kids don't go to school. But what if they decide to go elsewhere than CJEP or university, some kind of a vocational program? They're 100% eligible. A vocational school, apprenticeships, any of those things that are post-secondary education, you could leverage that money for. Okay, so it sounds pretty simple and interesting for a parent. But you do have to do your homework, do you? 100%. There's so much to unpack when it comes to this. So please go to your financial planner, your advisor, your bank, and have that conversation. And why would you want to do that? If you go to your bank, are there outside organizations that also help you through this process? Exactly. They're called promoters, and there are lots of companies that do this. But I really want you to get all the information. What is the fee that they're going to charge you? How long is money going to be in there? Do they have any different rules or fees? So you really need to do your homework, as you said, and dig into each and every one of those promoters. But start with your bank, start with your financial advisor. Ask him or her what they could recommend. That's really great advice that you're offering. We talk a lot about TIFSAs and RRSPs, but not necessarily that often about RESPs. So there is an option out there to help parents or guardians get kids into higher education. 100%. Beverly, thank you so much. My pleasure.

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