19 November, 2021 Financial Planning

Saving For Your Child’s Post-Secondary Education?

A parent holding a child's hand.

Registered Education Savings Plans (RESPs) are a great way to save for your child’s post-secondary education — but there are three types of RESPs to choose from. While all plans operate under similar principles, there are some significant differences you should be aware of.


Investing in an RESP has some major financial benefits, no matter which plan you choose. All encourage regular savings, enjoy tax-free growth and are eligible for government grants (within limits). 


If you’re thinking of opening up an account, there are three types of plans available — Individual plans, Family plans and Group plans. 


In this article, I’ll give you a brief synopsis of each plan so you can choose the one that’s right for you.

How do RESPs work?

RESPs are designed to encourage long-term savings for post-secondary education. 


A subscriber opens an account for a beneficiary (or beneficiaries, depending on the plan) and the money within the plan is invested. The growth on your money while it is invested is tax-free (unless it is used for purposes other than education).


To further encourage savings, the government provides grants totaling 20% of the yearly contribution, with a maximum grant of $500 per year and a plan limit of $7,200 for each beneficiary. Lower-income Canadians have access to an additional grant (depending on income), but the plan limit of $7,200 remains the same.


The maximum you can contribute to each beneficiary is $50,000 (if you exceed this amount, you will have to pay tax in the amount of one percent per month on your share of the over-contribution until it is withdrawn).


These grants are available within all plan types, as long as the beneficiary is under 17. In most instances, if the child doesn’t pursue post-secondary education by the time they turn 35, the grants will have to be repaid to the government in full.

Individual RESPs

This is the most flexible RESP, as anyone can open an individual plan and there are no restrictions as to who can contribute to it — you can even open one up for yourself.

  • The beneficiary must be a Canadian resident and have a valid Social Insurance Number (SIN). 
  • There are no restrictions on the age of the beneficiary. 
  • There are no restrictions on who can be named as a beneficiary and the beneficiary does not have to be a blood relative.
  • Anyone can make contributions, and the contributions can be made up to 31 years after the plan is opened.
  • Many financial institutions don’t require an initial deposit and have no contribution requirements.
  • Most financial institutions allow you to choose how to invest your RESP contributions.
  • You can change the beneficiary should the one you named not pursue post-secondary education.

An individual RESP is a good option if you would like to open an account for someone who isn’t related to you, you are a single-child family or you want to save for your own future educational needs.

Family RESPs

Family RESPs can have more than one beneficiary and are perfect for families with more than one child.

  • The beneficiaries must be Canadian residents and have a valid Social Insurance Number (SIN).
  • They must all be related to the subscriber by blood or adoption.
  • Beneficiaries must be under the age of 21 when you name them.
  • You decide how to divide the funds among the beneficiaries
  • If one beneficiary doesn’t pursue post-secondary education, the money in the plan can be used by the other beneficiaries.
  • Many financial institutions don’t require an initial deposit and have no contribution requirements.
  • Most financial institutions allow you to choose how to invest your RESP contributions.

Group RESP

Group plans work differently from individual and family plans. They tend to have higher fees and each plan has its own rules, many of which are quite restrictive. 

  • Beneficiaries do not have to be related by blood or adoption.
  • Most require an initial deposit and are subject to a variety of fees.
  • Monthly contributions are mandatory and there are penalties for missed payments (including expulsion from the plan in some instances).
  • Investment decisions are made for you.
  • How much your child receives depends on how much is in the group account and how many children will be starting post-secondary education.
  • Group plans often have additional rules about how much and how often your child can withdraw funds, and which education programs are eligible.
  • If you leave the group you face the loss of all the growth in the fund.

A group RESP could benefit someone who needs a structured plan to donate — essentially forcing them to save money. And if others leave the plan early, your child would receive a share of their earnings..

Know what you’re getting before you sign on the dotted line

Like everything associated with investing, there’s a lot of information to navigate and digest. And when you add private companies into the mix, it gets even more confusing.


If you’re thinking about saving for your child’s education and would like to sit down and discuss your options, you can reach us by email, phone, or by filling out our online form. 


When your child’s education is at stake, you want to make sure you’re taking full advantage of all the opportunities available — no sense leaving free grant money on the table.