Why RESPs Are Crucial to Your Child’s Future

Post-secondary education is one of the most critical components for a successful life in today’s world. Unfortunately, relying solely on savings may not be sufficient to put your child through higher education due to the ever-increasing cost of living and university education. The benefits of a Registered Education Savings Plan (RESP) in helping you fund your child’s post-secondary education are important to know for Canadian citizens.

In an RESP , Canadians can save for their children’s college education. Tax-free savings plans are a great way to help your children pursue their professional dreams without having to pay high-interest loans. 

As a  tax-free savings plan, contributions to an RESP are not taxed. In addition, the government contributes up to $500 a year per child. Under the Canada Education Savings Grant, the Canadian government matches 20% of RESP contributions with a lifetime maximum of $7,200 per child. 

Your child’s future education may seem like a small priority when they are young. But starting your savings through CST Spark RESPs early can result in your child being able  to pursue their educational dreams. 

Grant Eligibility

There is no doubt that one of the biggest benefits of using RESPs is the ability to receive financial aid from the government. To qualify for the CESG, you will need to make personal contributions to an RESP and the Government will add 20% of your yearly contributions up to $500 per year. Until their child turns 17, parents can receive this grant of up to $7,200 in their RESP. Parents should open an RESP as soon as possible to maximize the aid offered.

The Additional Canada Education Savings Grant (A-CESG) is another grant from the Canadian government that RESP holders can take advantage of. In contrast to the first grant, this one is only available to low-income parents. Each dollar deposited into an RESP is rewarded with up to an additional 20%. 

Based on these two grants alone, an RESP account can receive up to 40% for every dollar contributed. That can mean all the difference for families in need. Low-income families can also apply for the Canada Learning Bond (CLB) in addition to provincial grants available to families in Quebec and British Columbia.

Investment Options

With RESPs, investment options can be customized according to a person’s risk tolerance, time horizon, or investment objectives. When it comes to choosing an RESP provider, you should be aware that there are no one-size fits operations. A number of investment and savings options may be available to customers depending on the provider’s policy. You have the choice to invest in mutual funds, government bonds, or GICs, among other options. When investing with your child’s college fund, it’s best to protect your options by getting the advice of a professional financial advisor. 


As long as the account holder maintains the money in the RESP account, they can benefit from tax-sheltered savings. Dividends, interest, and even capital gains do not have to be deducted from the lifetime income of the RESP, meaning there is a much higher chance of accumulating money faster since no deductions are made. However, it should be noted that a tax has been imposed in two cases:

  • During the process of withdrawing funds. Student tax rates are applied when a student withdraws a specified amount considered income.
  • When the collective amount of funds in the RESP reaches $50,000 or more. Any additional funds above this threshold are taxed at a student rate. 

Open Contributions

If you are stocking away your child’s educational money into a regular savings account, you may be unintentionally blocking potential income. If your family and friends wish to make a gift to the fund, it’s possible and easy with an RESP. 

The RESP is like an enhanced bank account in more ways than one. Any contributions are allowed, and there is no restriction on who is eligible. College tuition is a significant financial burden on many parents, so the ability to open an RESP account is a welcome option. As a result, they will be able to grow their savings faster with the help of friends and family. It will increase your savings if you share your RESP account number with your friends and family instead of buying gifts. It’s also important to note that anyone can open an RESP with your child as a recipient. 

Extended Savings

RESP accounts can remain active for up to 36 years, which is excellent news for parents and guardians. Children who postpone higher education after high school can still keep their RESP funds until they resume their studies. Many RESPs allow beneficiaries to keep their accounts open for as long as 40 years. A disability tax credit is often required to qualify for this prolonged period.

It should be noted, however, that some RESPs may impose penalties if they are deferred after high school. 

Education Security

A regular savings account that is delegated for education could be used for some other emergency expense that may arise in the future. As a result of these types of situations, your child may not be able to pay for his or her college education in the future. In an RESP, the funds are specifically designed to be withdrawn only for the purpose of paying for schooling expenses. A Registered Education Savings Plan (RESP) protects funds and can only be used to pay for education expenses. 

Peace Of Mind

There is no way to predict what will happen in the future. Even if you believe you are on the right track with your college savings at the moment, you never know when things could go awry. You should be aware that certain life changes, such as the loss of a job, relocations, or divorces, can have a negative impact on your child’s college fund if it is not properly protected. Your child’s future will be protected when you invest in an RESP, and you can know that their future is secure. 

If your children are young but are already dreaming about their future careers, now is the time to take action. Investing in an RESP account for your child will help them to accumulate tuition money, take advantage of government contributions, and secure their future place on the campus of their choice. 

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