You Don’t Have To Be Rich To Open an RESP

by Pam on July 30, 2010

An article recently posted on globeinvestor.com suggests that not enough Canadian parents are taking advantage of the Registered Education Savings Plan (RESP) to save for their children’s education.  According to the article, it’s primarily the highly educated folks with higher incomes that are taking advantage of them, and the people with lower incomes who could really benefit a lot from them either don’t know enough about them or think they just don’t have the means to open one.

The great thing about RESPs is that you don’t need to have a lot of money to open one.  So if one of your savings goals is to help your child pay for post secondary education, an RESP is the best way to do it because your child will receive free money from the government in the form of grants and bonds.  In some cases, even if you don’t put any money into the RESP, your child may still receive some money from the government.

Opening one is easy.  Once you have applied for your child’s Social Insurance Number, sit down with an account manager at your financial institution of choice and ask to open an RESP.  When you open one you will automatically be applying for any government grant and bond money that is applicable to your child.  You can even open a family plan if you have more than one child.  The benefit of the family plan is that if one or more of your children decide not to further their education, the child or children who do can use the money invested in the RESP.

Don’t be discouraged if you feel you don’t have a lot of money to contribute.  The first step is to open one up so that if your children do qualify, they can at least receive the government money. Then, later on, if you have some extra money to contribute, or if your children’s grandparents or friends give your children some money as a gift, you can put it into the RESP.  You don’t have to put in a lot of money at a time, either, so don’t feel like you have to start out with a significant lump sum.  Just start small and do what you can afford.

For more detailed information on RESPs, check out the Canada Revenue Agency website at this link.

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