What to Consider Before Opening an RESP Account?

A Registered Education Savings Plan can be an effective way for parents and families in Canada to save for a child’s post-secondary education. In addition to personal contributions, an eligible child may receive government education savings incentives, including the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB). 

Before opening an RESP, however, it is important to understand how the plan works, what it costs, and which option fits your family’s financial goals.

1. Understand Your Education Savings Goal

Start by determining what you are saving for. An RESP can help fund eligible post-secondary education, including university, college, trade school, CEGEP, and certain apprenticeship programs. 

Consider your child’s age, the expected time before they attend post-secondary school, and how much you can realistically contribute each month or year.

2. Compare Different RESP Types

RESPs can generally be structured as individual or family plans, with group plans also available through some providers. A family RESP can have multiple beneficiaries who meet the applicable relationship requirements, while an individual plan is designed for one beneficiary. 

If you have more than one child, compare the flexibility of a family plan with the features and costs of individual or group plans.

3. Check Government Benefits

One of the key advantages of an RESP is the potential to receive government education savings incentives. Depending on eligibility, these may include the CESG and CLB and, in certain provinces, provincial education savings incentives. 

When choosing an RESP provider, ask which benefits they offer and whether they will help you apply for the benefits your child may qualify for.

4. Understand Contribution Rules

RESP contributions are not tax-deductible, so you should not expect a tax deduction when you deposit money into the account. However, investment earnings can accumulate within the RESP on a tax-deferred basis, and government incentives can add to the savings. 

It is also important to understand the contribution limits and avoid over-contributing.

5. Look Carefully at Fees

Fees can have a meaningful effect on long-term savings. Before signing up, ask about:

• Account-opening fees
• Management fees
• Investment fees
• Sales charges or commissions
• Withdrawal fees
• Transfer fees
• Penalties for stopping contributions

The Government of Canada recommends asking the RESP provider to explain all fees, limits, penalties, payment requirements, and other conditions before opening an account. 

Also Read: RESP vs. TFSA: Which is Better for Your Child’s Education?

6. Review the Investment Options

An RESP is an account structure, not a single investment. Depending on the provider, RESP funds may be invested in options such as mutual funds, GICs, term deposits, stocks, or savings products. These investments have different levels of risk and potential returns. 

Your investment choices should reflect your time horizon and comfort with investment risk. A longer time horizon may provide more flexibility, while families approaching the time when funds will be needed may want to review their risk exposure.

7. Find Out What Happens If You Cannot Keep Contributing

Some plans allow you to contribute whenever you choose, while others may have specific contribution schedules or requirements. Before opening an RESP, ask what happens if your financial circumstances change and you need to reduce or stop contributions.

This is particularly important for families managing mortgages, childcare expenses, and other long-term financial commitments.

8. Understand What Happens If Your Child Does Not Attend School

It is important to understand the rules before assuming the RESP can simply be withdrawn if your child does not pursue post-secondary education.

Depending on the circumstances, contributions, government grants and investment earnings can be treated differently when an RESP is closed or transferred. Certain transfers or rollovers may also be possible under specific conditions. 

Ask the provider to explain these scenarios before you commit.

9. Consider the RESP Provider Carefully

Do not choose a provider based solely on convenience. Compare at least a few options and ask for information in writing.

The Government of Canada recommends asking providers about their RESP types, investment options, fees, commissions, contribution requirements, withdrawal rules and what happens if your child does not continue their education. 

10. Consider How an RESP Fits Into Your Overall Financial Plan

Saving for your child’s education is important, but it should be considered alongside your other financial priorities. Families may also need to plan for emergency savings, retirement, mortgage payments, insurance coverage and other long-term goals.

For families in Brampton who are considering how an RESP fits into a broader financial strategy, speaking with an experienced insurance broker in Brampton can provide an opportunity to review insurance and financial protection needs alongside your long-term family goals.

Final Thoughts

Opening an RESP can be an important step toward preparing for your child’s future education. However, the right plan depends on your child’s age, your savings capacity, investment preferences, number of beneficiaries, fees, and the flexibility you need.

Before signing an RESP contract, compare providers, understand the costs and investment options, review government benefits, and make sure you understand what happens if your circumstances or your child’s education plans change. Taking the time to evaluate these factors can help you choose an RESP that fits your family’s long-term financial objectives.