SAVE AND STUDY

For thousands of students continuing with their education after high school, the cost of tuition can be intimidating. According to the Statistics Office of Canada, in 2015 the average debt upon graduation was $17, 500 and in the meantime this figure has significantly risen and continues to do so.

The good news is that there are programs that help reimburse some of these costs for students. One such organization is the Plan Registered Education Savings Plan (RESP), which can be used to receive up to $7,200 of government assistance in supporting students in further education.

RESP is a long-term savings program that helps parents save for their child's education after high school, including trade schools, colleges, universities and CEGEP. Any individual who plans to pursue further education can also open the RESP for themselves.

A user of this program would be an individual (usually while they’re still a minor) who will receive money from THE RESP to pay for schooling after high school, as long as the school and the program meet the set out requirements. The promoter is the financial institution where the RESP is opened. They manage all of the funds invested in the RESP and release money from the RESP to the user when required by law which will go toward the cost of the individual’s educational pursuits after high school.

After opening a RESP, contact your financial institution (promoter) to apply for the benefits of THE CLB (Canada Learning Bond) and THE CANADA EDUCATION SAVINGS GRANT (CESG).  If a young person meets the requirements, these benefits will be included in the RESP to assist in the payment of the overall cost of an individual’s post-secondary education. Acceptable expenses may include tuition, books, ccessories, transportation and rent. British Columbia and Quebec also offer special province exclusive benefits. People born in 2004 or later can also get CLB for themselves by the age of 21. A subscriber can also choose to make contributions. RESP contributions are not required for obtaining CLBs, but they are required for obtaining CESG.

However, according to Lisa Hannam, executive editor of MoneySense and author of MoneySense's Student Money Guide 2023) the RESP program, despite its advantages, is very much poorly applied. "The data shows that only one in six families has a SP account."

Report Highlights Listed Below

The best ways parents and students can make the most of THE RESP

1. Open a RESP account as soon as possible

Experts agreed that for families with young children, it is best to create an account as soon as possible, this is proven to be most useful, even if parents cannot contribute. Parents with a lower income can qualify for the Canada Learning Bond (CLB), which amounts to 500 dollars for THE SP in the first year of meeting the requirements and $100 each year up until year 15. This is regardless of other contributions  

made to the account. This means that if a RESP account is created immediately after birth, the child will have $2,000 in government provided grants by age 15.

For those who have the financial means to contribute to a RESP, CESG (Canada Education Savings) doing so adds 20 per cent to annual contributions up to a maximum of $500 per lifetime, the lifetime maximum being $7200.

2. Students, take higher amounts at the beginning

It is recommended that students use resources from the RESP in the early years of college or university, instead of evenly distributing it over all the years of their program. The reason being, in the early years of their studies, students are generally not yet working or they have a low income, and with the money used from THES (which is still taxed as earnings) they will still be in a lower tax bracket.

The situation may change in later years when the sum of higher earnings and money withdrawn from the RESP become subject to higher taxes. In some cases, parents predict their children will work toward earning more than one degree and for this reason they wish to stretch out the means from the RESP between six to eight years. However if the money in the RESP is left untouched for too long of a period of time and a student does not continue their studies, they will then face some penalties.

3. Withdraw some amount of money prior to the start of college/university

Parents and students are advised to start transferring money from the RESP to a savings accounts such as a TFSA before the start of college or university.

This article is part of the Local Journalism initiative.