Registered Education Savings Plans (RESPs) are the top choice for many Canadians when they save for a child's education. Why? RESPs offer two great advantages over most other ways of saving:
Free money
. Each year you contribute, the Government of Canada will put up to $500 a year in grant money into your RESP. Your child must be age 17 or younger. No other way of saving for a child's education gives you free money like this. Low-income families may even get more.
Tax breaks
. You don't pay tax on the money you make investing your RESP savings, as long as it stays in the plan. That makes an RESP a sheltered, or tax-advantaged, savings plan. Only a few other options offer this benefit for education savings.
Are there any reasons I would NOT want an RESP?
Some plans have strict rules about when you put money in. Or, they may have rules that can affect the amount of money you get. For example, some plans don't allow you to keep the money you make investing if your child does not go on to higher education in a qualified program. Make sure you read the fine print before you join any RESP plan.
Remember: Only RESPs give you tax-advantaged savings and government grants
That extra money can really help increase your savings, even if you only make a small contribution each year.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.
