Registered Educations Savings Plan

Scott Kok - Mar 12, 2024
A summary on the Registered Education Savings Plan (RESP)
Student Books

Registered Education Savings Plans (RESP's) - A great option if you are looking to save for your children's future education.

When I first enrolled in post secondary education I often think about the time I was given a Canada Savings Bond.  While it was a very nice gesture, over the 15-20 year period the $100 bond had only grown to an amount of ~$102.  Instead if this $100 were invested into an RESP 20 years ago at a rate of return of 5% It would have grown to ~$318.40.

Not only will you get government grants to aid in the education savings, but the withdrawals are often taxed at much lower tax rates assuming the student has little to no income.

While it depends on the program enrolled and the province of education, here are some of the average costs for annual tuition fees from 2022-2023.

  • Undergraduate program $6,834
  • Graduate program $7,437
  • Dentistry $23,963
  • Medicine $15,182
  • Law $13,222

*Source: Stats Canada

Some Key Features of the RESP

  • Tax Deferred Growth - Funds inside the RESP grow tax free until ultimately withdrawn
  • Low Tax - Taxed in the hands of the beneficiary when withdrawn for education purposes
  • Government Grants - Grants are available to boost your RESP savings such as the Canada Education Savings Grant (CESG)  The government will match 20% of your annual contributions and provide up to $500 in CESG per beneficiary each year.  Maximum CESG is $7,200 per beneficiary
  • Lifetime Contribution Limit - $50,000 per beneficiary
  • Plan Types - Can have single beneficiary plans or Family Plans for multiple beneficiaries
  • Subscribers - Can be held by a single owner or multiple owners referred to a subscriber(s)

If you are in a 48% tax bracket and invested $2,000 per year at 6% for the next 18 years you would accumulate:

  • RESP - $78,624 with CESG
  • RESP - $65,520 without CESG
  • Non-Registered Account - $49,407

If you're looking for an advisor I'd love to work with you and help you meet your goals.  I'm always open to chatting and you can book a call with me by clicking the link below.

 

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An article with more information regarding RESP's can be found here.