Once you’ve opened an RESP for your (grand)child or (grand)children, though, what should you do with it?
How often and how much to contribute to an RESP
Ideally, you should contribute at least $2,500 per year, if possible. An RESP can stay open for up to 35 years, giving you plenty of time to contribute up to the $50,000 maximum. An important date to be aware of when it comes to your contributions is December 31st of each year. The end of December marks the government grants deadline, specifically for the Canada Education Savings Grant (CESG). This grant matches 20% of your first $2,500 in contributions per year, up to $500, to a lifetime maximum of $7,200 per child. (To get the full $7,200, you need to contribute $36,000 strategically.)
The CESG is available until the end of the calendar year that your child turns 17. But take note: you can only catch up on the CESG one year at a time, for a maximum grant of $1,000 in a given year. That’s why it’s best to contribute early, often and to stick to a schedule.
Read more about government RESP grants and the RESP contribution deadline.
What investments can you put in an RESP?
You can deposit and save cash inside an RESP, but its value is unlikely to keep pace with inflation over time. Many families invest in the account so that the money has the potential to grow. An RESP can hold:
These types of assets have varying levels of risk and potential reward. Bonds and GICs have guaranteed rates of return, while mutual funds, ETFs, stocks and options depend on the performance of financial markets. It’s important to choose investments that fit your family’s needs and situation, including your time horizon (how long until your child heads off to college, university or trade school) and risk tolerance (your comfort level with investment volatility). Your child’s RESP shouldn’t be keeping you up at night.
An RESP expert can help you choose investments
Maybe you’re very good at saving but you’re new to investing. You can call upon RESP experts, such as those at Embark, for assistance. Embark’s Student Plan uses a glide path investment strategy that automatically adjusts to build savings when your child is young, before investing more conservatively closer to your withdrawal period so you’ll have as much funding as possible when you need it. Currently, Embark has a special offer, exclusive to MoneySense readers: Start an account using the promo code MONEYSENSE100 and Embark will contribute $100 to your child’s education when you save $200. Visit Embark* for details.
Read more about RESPs:
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Andrew Lo
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