3 types of RESPs

You can open an individual plan, a family plan or a group plan. Group plans are only offered by scholarship planScholarship plan A type of Registered Education Savings Plan (RESP) that pools together the money of many investors. An investment manager invests the money for you, often in lower-risk, fixed-income investments such as bonds and GICs. Enrolment fees are often high and there may be strict rules.+ read full definition dealers. They tend to have higher fees and more restrictive rules than other plans.

The person who opens the plan is called the subscriber. The person who is named to receive educational assistance payments (EAPs) under the plan is called the beneficiaryBeneficiary The person(s), institution, trustee or estate you choose to give money, property or other benefits when you die. You may name beneficiaries in your will, insurance policy, retirement plan, annuity, trust or other contracts.+ read full definition.

1. Individual plan

An individual plan is intended to pay for the education of one beneficiary.

Anyone can open an individual plan and anyone can contribute to it. You can even open a plan for yourself. You usually don’t need to make a minimum deposit.

If the beneficiary doesn’t continue with their education after high school, you may be able to name another beneficiary.

Contributions:

  • You decide when and how much money to put in, up to the lifetime contributionContribution Money that you put into a savings or investment plan.+ read full definition limit of $50,000 for a beneficiary.
  • If you have an RESPRESP See Registered Education Savings Plan.+ read full definition with a financial institution, you decide how to investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition your money. If you have an RESP with a scholarship plan dealer, your money is invested for you.

2. Family plan

A family plan can have more than one beneficiary. But each beneficiary must be:

  • related to the person who opens the plan (for example, your children, grandchildren, brothers and sisters), and
  • under 21 when you name them.

Contributions:

  • You usually don’t have to make a minimum deposit when you open the plan.
  • You decide when and how much money to put in, up to the lifetime limit of $50,000 for each beneficiary.
  • If you have an RESP with a financial institution, you decide how to invest your contributions. If you have an RESP with a scholarship plan dealer, the money is invested for you.

Using the money for education:

  • You decide how to divide the funds among the beneficiaries.
  • If one of the beneficiaries doesn’t continue with their education after high school, the other beneficiaries can still use the money in the RESP.
Transferring RESP money among your children

You can transfer money between individual RESPs for siblings without any taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition penalties. And, you do not have to repay any Canada Education Savings Grants (CESGs). This applies to transfers that take place after 2010. The child who benefits must have been under 21 when the plan was opened.

3. Group plan

Group plans work differently from individual and family plans, and each plan has its own rules. They also tend to have higher fees and more restrictive rules.

You can open a group plan for one child. They don’t have to be related to you. You must make a minimum depositMinimum deposit The lowest number of dollars you have to put in a bank account or other investment.+ read full definition when you open the plan.

Contributions:

  • You put money into the RESP according to a set schedule, up to the lifetime contribution limit of $50,000 for a beneficiary.
  • The money you put in is pooled with contributions of other investors.
  • All of the investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition decisions are made for you.

Using the money for education:

  • Your child shares in the pooled earningsEarnings For companies, it’s the money they make and share with their shareholders. For investors, it’s the money they make from their investments.+ read full definition of investors with children the same age. How much your child receives depends on how much money is in the group accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition, and the number of children in the group who will be starting post-secondary education.
  • Group plans often have additional rules about how much and how often your child can take EAPs, and which education programs are eligible. Know the rules before you open a group plan.

Learn more about how group plans work.

If you change your mind

For all plans offered by scholarship plan dealers (including group plans), you have the right to withdraw all of your money within 60 days if you change your mind. After 60 days, you can get your money back, less any fees. Scholarship plan dealers are required to provide a prospectusProspectus A legal document that sets out the full, true and plain facts you need to know about a security. Contains information about the company or mutual fund selling the security, its management, products or services, plans and business risks.+ read full definition that includes a short Plan Summary with the information you need. Be sure to read and understand this document.

Key point

RESPs are for adults, too. You can save tax free for your own education in an individual RESPIndividual RESP An RESP that you open for a single child or other beneficiary. The beneficiary does not have to be related to you by blood. You choose when and how much you want to contribute.+ read full definition. However, the government grants are only for children aged 17 or younger.

Take action

Shop around before you buy. Different RESP providers and plans have different rules and fees.

Caution

You have 60 days to cancel plans provided by scholarship plan dealers without any penalty. Be sure to read and understand the rules outlined in the short Plan Summary provided in the plan prospectus.

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