The Big RESP Series

by Mike Holman

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This post is part of the Big RESP Series. See the entire series here.

I decided to do a detailed series on the RESP program available to Canadians (my apologies to our non-Canadian readers). This topic has been covered by other blogs and myself in various posts but it’s really a topic for several posts. The tricky part of planning this series was to make it long enough to contain most, if not all of the information an investor may want to know about RESPs but not so long that no one would read it because it would contain too much useless information. My plan is to post this series once a week. This first post briefly explains what an RESP is and the various topics I’ll be covering in the series.

These rules are valid as of 2008.

What is an RESP and how does it work?

Registered Education Savings Plan accounts are government sponsored accounts that you can set up at most brokerages, banks or through a financial advisor. You can contribute money into the account and you will get a 20% grant from the government up to a certain amount. There are no taxes payable on investment income during the life of the account so any interest, capital gains or dividends will not be taxed. When the money is withdrawn to be used by a student then it is taxed in the hands of the student, however the original contributions are not taxed upon withdrawal. If the child does not go to school then the plan is collapsed and there are extra penalties to be paid on the plan.

I’ll be covering the following topics in this series. They won’t all be separate posts but some of them will be. Feel free to send me a question or topic if I’ve missed anything.

  • Contributions and CESG – rules and regulations.
  • Other grants – Canada Learning Bonds, Alberta (ACES) plan.
  • Withdrawals – how they work.
  • Eligible Institutions.
  • Plan Collapse – what happens if the student doesn’t go to school?
  • How to set up an account.
  • Pooled plans.
  • Asset allocations and sample portfolio.
  • Accounts – individual and family.
  • Financial analysis of resp vs. non-registered accounts.
  • My suggestion for a better RESP program.
  • How to deal with problems with your accounts.
  • RESPs – Keeping them in perspective.

See the next post – RESP Contributions.

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Want to learn more about RESPs? Buy The Book:

Resp-Book

The RESP Book: The Simple Guide to Registered Education Savings Plans

Everything you need to know about RESPs.

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Welcome to Money Smarts! If you're new here, please read the "About" page to find out more about this site. If you would like to receive updates by email then sign up here or you can subscribe to the RSS feed. Thanks for visiting!

{ 12 comments… read them below or add one }

1 Canadian Capitalist

Neat idea! RESP is so complicated that I find people are confused all the time, so a post or two really doesn’t do it justice.

2 FourPillars

Thanks – hopefully they won’t be even more confused after reading the series :)

Mike

3 veblengood

No child in Canada should ever have to pay for university. The government gives FREE money to all children.

At the very least, every parent should save this FREE money in a RESP (more free money).

It’s sad to see all the young people miss out on opportunities for education because their parents were too greedy/stupid to save money given FREE to THEM.

4 veblengood
5 TheFinancialBlogger

Great idea FP,
I am actually thinking about putting money aside for my kids… man it’s though to save money when you have children ;-)

6 FourPillars

Hi FB – thanks.

I’ll mention it about 100 times in the series but I wouldn’t put money in an resp if you don’t have it – look after the main finances first.

Mike

7 veblengood

How could you ‘not have it’? The Government gives free money to kids in Canada.

That’s NOT your money. Put it aside, don’t be so selfish.

8 FourPillars

Veblengood – most of the grants are not available unless you make a contribution first. Obviously the grants are a good deal however there is no point in putting money into an resp if you end up taking it out again because of financial difficulties.

The fact is when you have kids you have to be able to provide for them from birth onwards – the financial obligation doesn’t start when they go to post secondary school.

Mike

9 CanadianInvestor

Suggest you add as a topic – how to withdraw money in the right way so you don’t lose any federal contributions.

10 FourPillars

Thanks CI – what happened to Outroupistache?

I’m not sure if that will be a topic on it’s own but I do cover all the various withdrawal scenarios.

Mike

11 CanadianInvestor

Re name change, it’s merely a case of becoming more normal, maybe a bit easier for people to relate to on my blog.

Looking forward to reading the RESP post series; there,s always something one learns or is reminded of.

12 veblengood

The free money I’m talking about isn’t just the grants.

I’m talking about the Child Care Benefit, the CCTB etc.

FREE money, again, how can you ‘not have it’? Take that free money and put it into a RESP.

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