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RESP vs. RRSP and TFSA: What’s the best option for education savings?


I know you’ve heard of an RESP before. The registered education savings plan (RESP) has been around for nearly 50 years, helping Canadian parents, grandparents and guardians save up for a child’s post-secondary education. Since the RESP’s 1974 launch, however, the government has created other accounts designed to help Canadians grow their savings, like the tax-free savings account (TFSA), and many banks have launched a high-interest savings account (HISA). With all of these options, you might be wondering if an RESP is still the best way to save for your child’s education.

It’s a great question that I often hear from parents, who are understandably worried about the growing costs of higher education. The price tag for tuition is steep—and getting steeper. For the 2022–23 school year, the average undergraduate tuition fee in Canada was $6,834. That’s 2.6% higher than the year before, and it doesn’t include expenses like textbooks, accommodations, meals and transportation. With the cost of living continuing to rise across Canada, families are rightfully concerned about the best ways to save and make every dollar count—especially when it comes to putting money aside for their child’s education. So, let’s take a look at what would work best for you.

As with any type of investing, it’s good to start ASAP. Families can set themselves up for success by starting to save while their kids are young—still in diapers, even. And, if you have an older kid and you’re just starting an RESP now, keep reading. This is relevant to you, too.

Option 1: Registered education savings plan (RESP)

I’ll cover this first because that’s what we offer at Embark. An RESP is the only account designed specifically to help families save for post-secondary education. It’s a type of registered account, meaning that it’s registered with the federal government, and the money and investments held inside it grow tax-sheltered. Over time, that can make a big difference to your savings. The best part is, when you withdraw your funds from the account, they’re taxed in the hands of your beneficiary, often resulting in little-to-no taxes being applied to your savings if done strategically.

Another huge RESP benefit: It’s the only account where you can get government grants—free money for your child’s education—if you properly plan your contributions.

The big one is the Canada Education Savings Grant (CESG). The government will match 20% (up to $500 in a given year) on your first $36,000 of RESP contributions; for each child, the maximum CESG is $7,200. Low-income families are eligible for an additional $2,000 in the form of the Canada Learning Bond (CLB), and parents residing in British Columbia and Quebec have access to additional grants, too. (To see how your savings can grow in an RESP, try our education savings calculator.)

With an RESP, every child has a maximum contribution limit of $50,000. Over the plan’s 35-year lifetime, it can grow far beyond that mark through government grants and investment income. If you have more than one child, you can also open a family RESP and combine and divide the funds as needed between them. If your children don’t end up going to school, you can transfer your RESP assets into your RRSP (except for the grants, which will go back to the government), if you have contribution room.

Option 2: Registered retirement savings plan (RRSP)

The RRSP is another type of registered account, created to encourage Canadians to save for retirement. Your RRSP contributions are deducted from your taxable income, and your savings and investments can grow tax-sheltered inside the account, until you withdraw them. For most Canadians, that happens in retirement, when they’re in a lower tax bracket.

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