Written by: Kaleido
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All parents want to offer their child a good education and the opportunity to fulfil their dreams. Investing in a registered education savings plan (RESP) is an ideal way to save for a post-secondary education. To maximize RESP savings, t’s best to open an RESP as soon as your child is born, but this may not be the easiest time to shop around for a financial product. So why not do so while you’re pregnant?
Between changing diapers and adjusting to sleepless nights, not all new parents may feel up to learning about a financial product. A simple solution is to take the initiative of shopping around for an RESP in the last couple of months before the birth. Most RESP providers will be happy to send a scholarship plan representative to your home—at your convenience—to go over the various products and advise you in selecting a plan suited to your needs.
Financial planning is always easier when you’re well rested and have time to read about the different products available on the market to make an informed decision.
Once you have chosen a product and subscribed to your plan, the rest takes care of itself. Your plan will take effect as soon as your child is born, and only at that time will your RESP contributions begin. You can then focus all your attention on baby cooing and showering your little angel with love, knowing that you’re making the right plans for their future.
The only information you will be required to provide is your and your baby’s social insurance numbers (SINs) in the 24 months following your plan’s effective date. This information is necessary for your plan to be registered with the Canada Revenue Agency and for your child to be eligible for generous government grants, such as the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). Several provincial governments also offer grants. The Quebec government offers the Quebec Education Savings Incentive (QESI). These grants could increase your savings by 30% to 60 %, an amount that could be as high as $12,800* more per child!
Learning about RESPs doesn’t have to be a stressful or strenuous task. An easy and entertaining way to incorporate a little financial planning in your pregnancy is to have a scholarship plan representative attend your baby shower to make a short presentation or give a fun quiz. Your friends may have smart questions you hadn’t thought of or personal experiences to share.
In addition, having a representative attend your shower is a great way to introduce RESPs to your family and friends as an original and interesting gift idea for your baby in the future. Kaleido even offers gift certificates applicable to new or existing RESPs.
Whether you’re an expectant, new, or seasoned parent, there’s never a wrong time to plan for your child’s future. But by opening and contributing to an education savings plan during your child’s early years, from birth if possible, you will enjoy the full benefits of an RESP, particularly higher investment income. If you open a group RESP during your child’s first year (0–12 months), your savings and the government grants will grow tax-free over a 17-year period! The following chart shows how it works.
1This amount includes:
Note: The REFLEX plan returns shown above are not guaranteed for the future. The calculation is for a resident of Quebec. REFLEX is no longer available for subscription at this time.
*Canada Education Savings Grant (CESG) of 20% to 40%. Based on net family income. Annual limit of $600. Maximum lifetime total per beneficiary of $7,200. QESI (Quebec Education Savings Incentive) of 10% to 20%. Based on net family income. QESI annual limit of $300. Maximum lifetime total per beneficiary of $3,600. Canada Learning Bond (CLB): For a child born after December 31, 2003, to a family receiving the National Child Benefit Supplement. Some restrictions apply. See our prospectus at kaleido.ca.