What is a Registered Education Savings Plan (RESP) and why do I need one?

A Registered Education Savings Plan (RESP) is an investment vehicle designed to help parents, grandparents and others concerned adults finance the post-secondary education of a child. Governments have cut back funding in the past decade, while post-secondary institutions have consistently raised tuition fees. These actions have left families with the reality of paying substantial costs for their children's future post-secondary education. Human Resources and Development Canada estimates that by 2019, a four post-secondary education could cost as much as $100,000 so starting an RESP as early as possible is an important decision many parents should be considering.

There are several advantages to saving for your child with a RESP:

• You can contribute up to $4,000 per child, per year, lifetime maximum of $42,000
• RESPs qualify as a tax-shelter for federal income tax purposes so your savings grow tax-free until they are withdrawn. This allows money to grow much faster than a normal savings account where the interest would be subject to taxation. Plus, when withdrawn for post-secondary education the earnings are taxed at the students lower tax rate.
• RESPs may be eligible to receive the 20% Canada Education Savings Grant (CESG). The Government will match 20% of the first $2,000 of annual contributions made to an RESP, maximum of $400 per year, $7,200 lifetime.
• In the event your child does not pursue post-secondary education you may either transfer the plan to another child or transfer your RESP income to your RRSP (up to $50,000 per contributor)*

The key is to start early. The younger your child is when you start your RESP the more time you have to save and let your RESP grow. With the help of Heritage Education Funds RESP, your child's dreams of higher education can become a reality.