Investing in Your Child’s Future: The Importance of RESP Plans in Canada
Registered Education Savings Plans RESP in Canada can be an excellent way to help your child pay for their education costs, reduce their stress levels, and avoid taking out large student loans. According to recent statistics from Statistics Canada, the average tuition fee for undergraduate programs in Canada was $6,580 per year in 2021. The costs can be even higher for specialized programs like dentistry and veterinary medicine.
Given the trend of rising education costs, maximizing the benefits of a RESP plan is crucial. By starting a RESP for your child, you can help ensure that they have the financial resources they need to pursue their education goals without having to take on excessive debt.
Understanding Registered Education Savings Plans (RESPs)
A Registered Education Savings Plan (RESP) is a government-backed savings plan that helps parents save for their children’s college education. Similar to other registered accounts, like RRSPs, TFSAs, and RRIFs, RESPs have a tax-protected component that allows investments to grow tax-free, making it easier to accumulate wealth over time.
However, RESPs offer even more benefits, especially the government grants built into the plan that match the money parents contribute. The main grant, called the Basic Canada Education Savings Grant (basic CESG), offers a 20% match on annual contributions of up to $2,500, up to $500 per child. Additional CESG and the Canada Learning Bond (CLB) are also available to low-income families based on income.
Moreover, the government’s support for your child’s education serves a broader purpose. A healthier, more educated society with less poverty and stronger economic growth can be achieved when parents can afford to send their kids to college or university.
Top RESP Providers in Canada to Help You Invest in Your Child’s Education
When it comes to saving for your child’s education, choosing the right RESP provider is crucial. An RESP provider can be a bank, credit union, trust company, or online wealth manager, who helps you invest your contributions and any grant money you qualify for, such as the Canada Education Savings Grant and the Canada Learning Bond.
If you’re looking for a low-cost RESP provider that requires minimal work, online wealth management companies are a great option. Based on our research, some of the best RESP providers in Canada are:
- RESP CI Direct Investing
- Questrade RESP
- Wealthsimple RESP
- Justwealth RESP
By choosing the right RESP provider, you can ensure that your child’s education is financially secured, and you can provide them with a brighter future.
Top RESP Providers in Canada and their Fees
If you’re planning to invest in a RESP, you’ll need a RESP provider to help manage your money. RESP providers can be banks, credit unions, trust companies, or online wealth managers. They invest your RESP contributions and government grants like the Canada Education Savings Grant and the Canada Learning Bond. Here are some of the best RESP providers in Canada and their fees:
- CI Direct Investing RESP: CI Direct Investing offers low-cost ETF portfolios and private portfolios investing in real estate, mortgages, options, and other assets. However, the private portfolios are only available to those with significant investments. The fees for CI Direct Investing RESP are:
- 0.60% for the first $150,000
- 0.04% for the next $350,000
- 0.35% for investments over $500,000
- MER ranges from 0.16% to 0.25% for ETF portfolios
- MER ranges from 1.00% to 1.40% for private portfolios You need at least $1,000 to start investing in an RESP at CI Direct.
- Questrade RESP: Questrade offers RESP plans through their managed investment service, Queswealth Portfolios. The government grants go into the plan and grow tax-free. The fees for Questrade RESP are:
- 5% interest rate for balances ranging from $1,000 to $100,000.
- 0.20% for accounts with a value greater than $100,000
- ETF fees range from 0.07% to 0.22% The minimum investment on Questwealth is $1,000.
- Wealthsimple RESP: Wealthsimple is Canada’s best robo-advisor with over $10 billion in assets under management. The Wealthsimple RESP investment account can be used for both individual and family RESP plans. There’s no minimum amount to start investing, and the government grants go into your Wealthsimple RESP account. The fees for Wealthsimple RESP are:
- 0.50% for investment accounts with less than $100,000
- 0.40% for accounts with a balance of more than $100,000
- ETF fees average at 0.20% Parents who want to choose their investments and rebalance, when necessary, can use the Wealthsimple Trade Platform.
- Justwealth RESP: Justwealth offers Education Target Date Portfolios that can be set up as an RESP. The Justwealth Capital Preservation Portfolio is designed for college savings when your child turns 18. The annual management fees for Justwealth RESP are:
- 0.50% for accounts with a balance of less than $500,000
- 40% discount for accounts with a balance of more than $500,000
- ETF fees average at 0.20% There’s no minimum account amount for RESP accounts with Justwealth, but the minimum fee for a RESP each month is $2.50.
Consider these options and their fees when choosing a RESP provider for your child’s education savings.