Post-secondary education will be essential for 71% of Canadians, but only 50% have RESPs

Canada’s future economy will depend heavily on highly skilled workers who require post-secondary education (PSE). Employment and Social Development Canada suggests that the number is 70%(1). 

Children whose parents set aside education savings are more likely to attend. But half of Canada’s future students are currently experiencing a problem with their parents. The problem is that despite the generosity available under the Registered Education Savings Plan (RESP), which includes government supplements through the Canada Learning Bond (CLB).

And the Canada Education Savings Grant (CESG), only 50% of all eligible kids whose parents have participated in the plan; the rate falls 33% for those from low income who are eligible to receive the Canada Learning Bond. This is presents an opportunity for financial advisors to help current and future clients to prepare for their children’s future.

Here are some helpful points to share with your clients who are still unsure about opening an RESP:

• By starting early, their deposits will grow thanks to compounding interest and regular deposits.
• If cash flow is an issue, your clients can also benefit from the program even without personal contributions. The Canada Learning Bond is available for children from low-income families born in 2004 or later.
  • It provides an initial payment of $500 into an RESP for an eligible child
  • As well as additional payments of $100 for each year of eligibility, up to age 15, for a maximum of $2,000
  • Also provides $25 to cover any administrative fees
  • Made available through financial institutions
• The Canada Education Savings Grant is an extra payment into your clients’ account by the government and payment is automatic following the registration of the account. For every dollar they save in an RESP, the government will add .20-.40 cents. To be eligible, the child must:
  • Be up to 17 years of age (certain RESP contribution requirements must have been met before the end of the year in which the beneficiary turned 15 years of age)
  • Be a Canadian resident
  • Have a valid Social Insurance Number (SIN)
  • Be named as a beneficiary to an RESP
  • Have a contribution made to an RESP in their name

If you are a financial advisor working in Saskatchewan and British Columbia, remind your clients of the special provincial savings programs that they can take advantage of (Source: Employment and Social Development Canada):

• The Saskatchewan Advantage Grant for Education Savings provides a 10% match on the first $2,500 in annual contributions to an RESP for Saskatchewan residents, regardless of family income, for a lifetime maximum of $4,500.
• The British Columbia Training and Education Savings Grant provides a one-time grant of $1,200 into the RESP of every child born in 2006 or later. Subscribers have three years to apply once the beneficiary turns six. Beneficiaries born before August 15, 2009, have until August 14, 2018, to apply and those born in 2006 have until August 14, 2019.

In addition to speaking to your clients about adding the RESP as part of their savings plan strategy, it also is a great opportunity to include the discussion as part of their mid-to-year-end tax planning. Although the RESP doesn’t issue a tax receipt because the funds are tax deferred, unused amounts could be transferred to an RRSP after 10 years. For more in depth information, consult the EverGreen Explanatory Notes on our website.

¹ https://www.canada.ca/en/services/jobs/training.html

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