Scratch Pad - Flights of Fancy

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Introduction

RESP is a Registered Education Savings Plan, used to assist in financing post secondary education. With tuition of around $5,000, miscellaneous fees around $1000, books around $1000 and living costs anywhere from $6-8000, a year at university can easily cost $15,000 with a 4-year undergraduate degree costing $60,000. At 3% inflation, that $60,000 today becomes $102,000 18 years from today when today's newborn child begins university.

Features

• RESPs are similar to RRSPs in that they allow money to grow tax-free. The major difference is that you do not get a tax credit when you deposit money into the account.

Types of RESP

Family plan

• You can name one or more children as beneficiaries.
• They must be related to you either through birth or adoption.
• Any or all of the children named in the plan can use the money.
• You — or a financial adviser — decide how to invest the money.
• Wide range of investment options.

Individual plan

• There is one beneficiary who does not have to be related to you.
• The beneficiary can be an adult, including yourself.
• You — or a financial adviser — decide how to invest the money.
• Wide range of investment options.

Group plan

• Administered by a group plan dealer (similar to group RRSPs).
• Investments normally limited to fixed-income securities, such as GICs, T-bills and bonds.
• You are often required to sign a contract committing to regular contributions.
• Savings are pooled and amount of money each pool member receives depends on how much money is in that pool.
• You can name only one child as beneficiary.
• If the beneficiary does not go on to post-secondary education, you will get back only what you put into the plan.