Guide to Choosing the Best RESP Provider For You
October 17, 2020
What You Should Know About the RESP
As a proud new parent, you’ve just made the right decision: setting some money aside for your child’s post-secondary education. And you’re lucky to live in Canada, since the governments allows your savings to grow tax-free in a Registered Education Savings Plan (RESP).
You’ve done your research and saw that the RESP not only allows your savings to grow but also provides access to government grants—and if you have a lower income, you can even receive additional grants—that boost the sums invested (i.e., your money)*.
You also learned there are three types of RESPs. First, the individual plan, which can be opened for one beneficiary only. Second, the family plan, which allows you to name more than one beneficiary in one plan. Third, the group plan, in which the grants and income on your contributions are pooled with those of other subscribers whose beneficiaries were born the same year as yours. The beneficiary of an individual or group plan isn’t required to be the biological or adopted child of the subscriber.
A Wide Variety of RESP Providers
Now that you know the basics of the RESP, it’s a good idea to ask yourself how you can get the most out of this investment vehicle. To do so, you should choose a provider or promoter that can guide and support you every step of the way. It can be a financial institution (e.g., bank, trust company, mutual fund broker), a securities broker, or a group plan provider.
In all cases, it’s important that you carefully choose the RESP provider which best suits your needs. Your provider must be able to manage your savings and advise you on the different ways you can invest, as well as ensure the accumulated income is paid to your child once he or she enrolls in post-secondary education (which will happen sooner than you may think!).
Factors to Keep in Mind When Picking an RESP Provider
Before you take your pick from the best RESP providers, be sure to take these factors into account:
- Find out about the different types of providers (bank, trust company, etc.) as well as the payable fees, contribution rules and applicable penalties, if any;
- Learn more about the different investment options available to you, like stocks, guaranteed investment certificates (in a certificate of deposit or savings account) or mutual funds;
- Find out about the types of plans (individual, family or group) offered by your provider as well as the advantages, fees and obligations that apply.
Don’t forget that several investment vehicles are available and that each generates different returns in your savings account.
Must-Ask Questions to Choose the Right RESP Provider
Here are a few questions you should ask the RESP providers you’re considering before making a decision:
- What are the different fees I must pay to open an RESP and how much do they amount to?
- Do I have to make regular contributions? If so, can I change the amount contributed?
- What happens if I can’t contribute regularly?
- Which investments would be available to me and why?
- Is it possible to withdraw from the account before my child enrolls in post-secondary education? If so, which fees or penalties apply?
- Can I change the beneficiary of my RESP? If so, do fees apply?
- What happens if my child doesn’t want to pursue post-secondary education or decides to study part-time?
- What happens if I decide to cancel my RESP before maturity?
In light of the answers provided, you’ll be able to make informed decisions when opening your RESP.
* Canada Education Savings Grant (CESG) of 20% to 40%, based on adjusted family net income. Quebec Education Savings Incentive (QESI) of 10% to 20% based on adjusted family net income. Certain conditions apply. Refer to the prospectus.