How to save money for your children's education (RESP)?

A Registered Education Savings Plan (RESP) is one of the most effective tools for securing your children's future education in Calgary and across Canada. This special savings account not only allows your savings to grow tax-free, but also provides access to generous government grants that can significantly increase your savings.

The importance of an RESP is especially growing given the ever-increasing cost of education. According to the latest data, the average cost of tuition in Alberta is $7,586 per year for Canadian students, and the total cost of a four-year university education can reach $78,000, including room and board and other expenses. Projections show that by 2025, the average cost of a four-year university education in Canada will reach $101,319.

How RESPs work: basic principles

RESPs function as tax-deferred savings accounts where your contributions grow tax-free until you withdraw the funds. The system involves three main parties: the subscriber (the person who opens the account), the beneficiary (the child for whom the funds are intended), and the promoter (the financial institution).

Key benefits of an RESP:

  • Tax-deferred investment growth
  • Access to government grants and bonds
  • Flexibility in choosing investment options
  • Ability to use funds for various types of post-secondary education

Government grants and bonuses: maximizing your savings

Canada Education Savings Grant (CESG)

The most significant advantage of an RESP is the Canada Education Savings Grant (CESG), which provides a 20% match on the first $2,500 of annual contributions. This means a maximum of $500 in free money from the government each year, with a lifetime maximum of $7,200 per child.

Additional CESG for lower-income families:

  • Families with an income of $55,867 or less: an additional 20% on the first $500 (an additional $100)
  • Families with an income of $55,867-$111,733: an additional 10% on the first $500 (an additional $50)

Canada Learning Bond (CLB)

The Canada Learning Bond provides up to $2,000 over a lifetime for children from low-income families born after January 1, 2004. No contributions to an RESP are required to receive the CLB—it is automatic government assistance.

Provincial programs

Although the province of Alberta eliminated its Alberta Centennial Education Savings Grant in 2015, Alberta residents still have access to all federal programs.

Contribution limits and rules

Lifetime limits: The maximum lifetime contribution limit to an RESP is $50,000 per child.

Annual strategies: It is best to contribute $2,500 each year to receive the maximum CESG.

Catch-up option: You can only catch up one missed year at a time (max. $1,000 grant per year).

Types of RESP plans

Individual plan: For one child, the beneficiary does not have to be a relative.

Family plan: For multiple children, with shared funds and grants.

Where to open an RESP in Calgary

  • Banks: RBC, TD, BMO, Scotiabank, CIBC
  • Credit unions: ConnectFirst Credit Union, Innovation Credit Union
  • Alternative providers: Embark, Wealthsimple, Questrade

Investment strategies for RESPs

  • Conservative: GICs, deposits
  • Moderate: Balanced funds
  • Aggressive: Stocks, ETFs

Age strategy:

  • 0-10 years: aggressive investing
  • 11-15 years: balanced
  • 16-18 years: conservative approach

Automating savings

Recommendations for maximizing CESG:

  • $208.33/month or
  • $48.08/week or
  • $2,500/year lump sum

Withdrawals and tax implications

  • PSE: contribution refunds, tax-free
  • EAP: grants and income, taxable to the student

Limits: $8,000 (full-time) or $4,000 (part-time) during the first 13 weeks.

Cost of education in Calgary and Alberta

  • Mount Royal University: $9,200/year + accommodation $15,500-$25,228
  • University of Calgary: $7,100/year
  • University of Alberta: $7,012/year

Forecast: +36% increase in costs by the time children born in 2024 enter university.

Practical tips

  • Start immediately after the birth of your child
  • Prioritize $2,500 in contributions per year
  • Use a family plan if you have multiple children
  • Diversify your investments
  • Plan to withdraw 1-2 years before your child starts school

Alternatives and supplements to RESP

  • TFSA: for additional educational expenses
  • Scholarships: local and national programs

Common mistakes

  • Late start
  • Insufficient contributions
  • Wrong type of plan
  • Ignoring investment opportunities

RESPs remain one of the most powerful tools for securing the educational future of children in Calgary thanks to government grants, tax advantages, and investment flexibility.