A Simple Guide to Boost Your Child’s Education Savings through RESP Contributions

Securing your child’s education is a big goal, and the Registered Education Savings Plan (RESP) is a helpful tool for Canadian parents. In this blog post, we’ll break down RESP contributions in an easy-to-understand way, focusing on both the basics and some clever strategies to make your educational savings go further. This is a simple guide on the basics of RESP accounts and on maximizing RESP contributions to meet and exceed the ever increasing price of tuition in Canada.

Understanding RESP Contributions: RESP is like a savings plan with perks for education. It’s not just about saving money; it’s about getting extra help from the government, like the Canada Education Savings Grant (CESG). If you are an expecting parent and worries like we were, then be sure to read our blog post on Financial Planning for New Parents here.

Annual and Lifetime Contribution Limits

Simply, put there is no limit on how much you can put into a RESP account in a year. As of February 2024, the maximum that you could invest into a RESP is $50,000 for a beneficiary (child). You can contribute as much as you’d like in a given year. However, the maximum amount that the Government will contribute in a year is $500. This is done once you make a contribution of $2,500 to Canada Education Savings Grant (CESG). Contribution over $2,500 will not mean that the money received from the Government will increase.

The government has set a maximum grant you can get per child, which is $7,200. This means that if you were making contributions of $2,500 a year, you would receive about $7000 from the government post contributions in year 14. In this example, you would contributed $2,500 times 14 i.e. $ 35,000 from your side while the Government would have contributed $7,000 from its end. A contribution of $36,000 from your side would get you the maximum of $7,200 in CESG.

However, other grant programs, such as the Canada Learning Bond (CLB) and provincial grants, may have their own respective limits. Use the link at the end of the blog post to learn more about these programs.

Strategies for Maximizing RESP Contributions

1. Start Saving Early: Putting money in when your child is young helps it grow more. It’s like planting a seed for their education. If you invest this money in the correct assets, this could compound further and increase far beyond the amount that was contributed.
2. Get to Know Grants: Familiarize yourself with government grants available for RESPs, such as the CESG and CLB. Ensure your contributions align with maximizing these grants to capitalize on additional funds provided by the government.
3. Family Plans Can Be Smart: Opt for Family RESP plans, allowing you to designate more than one beneficiary (siblings). This approach maximizes grant opportunities for each child and offers an efficient way to leverage government grants.
4. Use Extra Grant Room: If you haven’t been saving much, there might be extra help from the government you didn’t use. Talk to someone who knows about this to catch up and get more.
5. Review and Adjust Contributions: Periodically assess your financial situation and modify contributions accordingly. Consider increasing contributions during financially stable periods to optimize potential growth.
6. Use Gifting periods more tactfully: Received a random gifts from aunts, uncles of grandparents ? Make this account a priority. Holiday season, you know what to do !
7. Tax Refund time is RESP time: This is a big one for us. For the past couple of years, we have been contributing to our son’s RESP as soon and as much (up-to $2,500) immediately upon receiving our tax refund.

Saving for your child’s education doesn’t have to be complicated. By understanding the rules and using simple strategies, you can make the most of the RESP. It’s like giving your child a head start in their educational journey, and every bit helps. Talk to someone who knows about these things to make sure you’re on the right track.

Want to Learn more ?

This Government of Canada website has it all on RESP contributions, withdrawals, beneficiaries etc. Be sure to always refer to an official Government of Canada page in your research. https://www.canada.ca/en/services/benefits/education/education-savings/managing-plan.html