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My advice • March 14, 2022
modified on June 09, 2022

Fund your child's post-secondary education with an RESP

A tool to help you give them a good start in life.

Students in front of a laptop looking at the screen having fun.

Tuition fees, housing, textbooks, personal expenses, etc. Post-secondary education costs can quickly become staggering, not to mention the fact that they vary depending on the program and the province. For undergraduate studies in Quebec, for example, annual tuition fees alone are estimated at $4,310 in 2021-20221. With a Registered Education Savings Plan (RESP), you or a loved one can save for a child's education and avoid the financial stress of student debt, especially if you contribute early. And for grandparents, it's a great way to get involved in a grandchild's future, by giving the gift of savings! Does this plan meet your needs? Here are some answers to the most frequently asked questions:

Who can open an RESP?

Any adult can open an RESP to help fund post-secondary education for a child they know, whether they are a parent, grandparent, godparent or even a family friend. Note that the total amount of contributions must not exceed $50,000 per child and is not tax-deductible.

What types of RESPs are available?

Family RESPs

The subscriber, who must be a parent or grandparent, can open an account for several beneficiaries (children). This type of plan has the advantage of allowing grants to be transferred between siblings, for example, if one of the children decides not to pursue post-secondary education.

Individual RESPs

The subscriber, regardless of family relationship, can only designate one beneficiary.

What are the limits on government grants?

Canada Education Savings Grant (CESG)

The CESG is available to all Canadian children until the end of the year in which the child turns 17 and is equal to 20% of the first $2,500 contributed annually to an RESP (max. $500/year). The lifetime limit for grants is $7,200. In addition, if you have a modest income, you may be able to receive the Additional CESG, which adds 10-20% on the first $500 or less of contributions made.

Canada Learning Bond (CLB)

A CLB of $500 in the year the account is opened and $100 per year thereafter until the child turns 15 years of age, to a maximum of $2,000, is available for children in families with modest incomes. The CLB does not require any contributions; simply opening an RESP is sufficient to access this bond.

Quebec Education Savings Incentive (QESI)

The QESI is a refundable tax credit paid into an RESP. It is equal to 10% of the annual contributions made (max. $250/year) and the maximum grant is $3,600. In addition, depending on your income, you may be able to receive the additional QESI, which can range from an additional 5% to 10% on the first $500 you contribute each year.

How can I maximize the government grants?

  • Save as early as possible, and, if possible, contribute an annual amount of $2,500 to get the maximum government grants. You may be able to use family allowances or a tax refund to help you save.
  • Set up a regular savings plan so you can save without thinking about it.

My child is in high school. Is it too late to contribute to an RESP?

While the earlier the better (preferably when your child is born), it is possible to contribute until your child's 17th birthday. However, if you want to take advantage of the CESG, be aware that special requirements apply when the beneficiary is 16 or 17 years old. Please consult the Canada Revenue Agency website for full details

What if my child decides not to continue their education after high school?

There are several options available to you. You could:

  • transfer the amount to another RESP, or name another beneficiary (if the RESP is an individual or family plan)
  • put the money into an RRSP to avoid paying tax on the investment income. However, you will lose the grants
  • close the RESP and disburse the money. However, you will lose the grants and have to pay tax on the investment earnings
  • leave the RESP open and wait to see if the child returns to school later, since the life of the RESP is 35 years from the time it is opened.

Does the RESP have an impact on loans and grants?

This plan in no way prevents you from being eligible for loans and bursaries offered by the Quebec government.

As you have seen, the RESP is an advantageous tool to help your children pursue post-secondary education and get a good start in life. In addition, at LBC Financial Services Inc., you have the flexibility to choose your investments from a selection of 7 mutual fund portfolios according to your investor profile and time horizon. Do you have other questions about RESPs? Our advisors are here to answer them for you and to suggest the solution that best suits your situation.

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