Pair Your Child’s Educational Goals with a Flexible RESP
Insight Planning for your children’s education is a burdening task. With RESPs, saving becomes easier and government grants can assist you in the process.
Registered Education Savings Plans (RESPs) are the absolute best tool for parents to save for their children’s future education. By contributing regularly each year, your child receives a free grant — through the Canada Education Savings Grant — of up to $500 annually (to a maximum of $7,200 over the life of the account). If you live in Quebec or British Columbia, there are additional grants that, for parents, equals free money.
The reason I shout from the rooftops about the benefits of RESPs is because the cost of education is on the rise and many parents are unprepared. This can result in one of two things — first, parents emptying their retirement savings accounts to pay hefty tuition bills or second, students applying for massive loans and lines of credit. Scholarships can partially offset these debts, but thousands of Canadian students aren’t bothering to apply.
This is an all-around bad financial scenario for the entire family.
But starting early to take advantage of tax benefits and compound growth available in an RESP can make a major difference in a child’s ability to afford a post-secondary education down the road.
Say hello to flexible RESPs
In the past, group RESP providers set up complicated products that worked like this — a number of families would pool their savings in a group scholarship plan. Those families whose students did not attend higher education would receive their contributions back, and those families whose students did attend a traditional four-year post-secondary education would reap all the investment proceeds of the plan.
For most families, these plans worked well. But others found these products to be too restrictive — what if their circumstances changed and they had to stop making contributions? What if their children only attended a two-year college program or dropped down to part-time studies?
Knowledge First Financial, a progressive RESP provider, was first-to-market in 2012 with a revamped flexible RESP plan, the Flex First Plan. Over 85 percent of their new customers choose this plan because students can attend any kind of post-secondary institution (including for part-time or shortened programs), parents can stop or start contributions conveniently, and students have lots of choice when it comes to the timing and amounts they withdraw from their RESP.
Other group RESP providers are starting to follow this shift towards more flexible RESPs. This is great news for parents, who can now take advantage of this new and emerging trend in individual flexible RESPs and give their children more choice for the future.