RESPs and saving for postsecondary education in Canada

A big part of helping your kids pursue their dream is preparing for the rising cost of postsecondary education. A Registered Education Savings Plan (RESP) is one of the best ways to save and secure your children’s future.

In 2020/2021, the average undergraduate tuition for one year was $6,580, up 1.7% from the previous year. That doesn’t include costs such as rent, food, books, transportation and monthly bills, which can add up to much more than the cost of tuition.

To pay these bills, a lot of students take out loans, which they end up paying off well into adulthood. To pay tuition alone, which may reach over $7,000 a year if tuition continues to increase at the same rate, you’ll have to save $28,000 to put one child through a four-year program.

Starting an RESP in Canada

A Registered Education Savings Plan is a tax-free savings plan for your children’s postsecondary education. Parents and family members can contribute to the RESP up to a lifetime limit of $50,000 per child. The federal government will match up to 20% of your contributions, until your child turns 17, up to $500 per year.

Why start an RESP with an insurance company?

Insurance companies are the only organizations that can sell segregated funds. Segregated funds are a secure investment option because, unlike mutual funds, they have a maturity or death benefit of 75% of your initial RESP investment, depending on the level of coverage you choose.

Make life insurance part of the package

In addition to saving money in an RESP, you can also buy affordable life insurance for your kids with our Head Start program. At first glance, life insurance may seem unnecessary for children, but there’s a cash value component that allows for tax-advantaged cash accumulation. Plus, life insurance premiums are at their lowest for children. Consider it additional savings that can be purchased now and accessed later for postsecondary education.

TFSAs can do the trick

If you max out your child's RESP, you can also put money away in a Tax-Free Savings Account (TFSA). If your child has a part-time job and is declaring income with the Canada Revenue Agency (CRA), they can open a TFSA and save up to $6,000 a year, tax free.

Plan together

Sit down with your kids when you’re planning for their future and develop a budget together. Ensure everyone understands how much it’s going to cost to go to school and also live day-to-day if they leave home.

The more they’re involved, the more they’ll understand budgeting and how they can help save money by making the right choices and working hard.

To find out more about saving for college or university, contact your Financial Advisor.