Can you tell fact from fiction when it comes to RESPs?

Kids Holding Sign

A Registered Education Savings Plan (RESP) is a smart tool for education savings. Yet for many, the details about how an RESP works isn’t quite clear, and that has led to some misinformation about this easy way to save towards post-secondary education. How do you fare on your RESP intel: can you tell fact from fake? Read on and see.

RESPs can only be used towards university tuition.
Fiction. RESPs are for paying for all kinds of post-secondary education. Not only can they be used for university, but they can also be used to pay for community college, vocational, technical and trade schools, correspondence courses and even part-time studies. Not only that, the funds from an RESP don’t have to just cover tuition; that money can be used for rent, school supplies and living expenses incurred while studying. To withdraw funds, you’ll just need to show proof of enrollment in a qualified program.

You need to have saved the full amount of tuition.
Fiction. Of course, the more you contribute, the more potential savings you will have. But that doesn’t mean you’ll need to have the entire tuition amount saved by the time your child finishes high school. Remember, your savings will continue to grow tax-free while your child pursues his or her studies over several years.

You lose your investment if your child doesn’t go to post-secondary school.
Fiction
. If your child decides not to continue with his or her schooling, you can transfer your plan to another sibling. If you have no other children, the contributions you made can be withdrawn or the income transferred to your RRSP (or your spouse’s RRSP) if you have room and certain qualifications are met but the grants received will need to be returned to the government.

If your child decides to go back to school after working, you can use the RESP.
Fact
. You have 36 years from the date you started your plan to withdraw your RESP funds. So yes, your child can change his or her mind and go to school at a later time.

It’s too late to start an RESP for an older child.
Fiction
. While it is to your benefit to start early and maximize government grants, you can start saving at any time. You can contribute up to $2,500 each year, or up to a $50,000 maximum in each beneficiary’s plan. Speak to your plan provider about how to catch-up on government grants and to maximize your RESP contributions.

You can contribute as little as $9.50/month.
Fact
. Put aside as little as $9.50 per month in an RESP and then let the magic of compounding take over from there. Of course, the more you contribute, the more quickly your savings will potentially grow. With a CST RESP, you have the flexibility to contribute within your budget or choose a contribution schedule that you can adapt to easily. We know life happens and if you need to skip a contribution or two, we’ll work with you to keep the RESP on track to save for child’s future post-secondary education.

You can also boost contributions by investing your Canada Child Benefit cheque or your income tax refund into your RESP. And remember, relatives can help contribute too – RESP contributions make great birthday presents!

Knowing the facts about RESPs can help you feel confident about the flexibility and ease of using them to save towards education. If you don’t have an RESP in place, why not start now? As one of Canada’s largest providers of education savings plans, CST has helped more than 500,000 families save for post-secondary school. A CST Consultants Sales Representative can help you set up an RESP that meets your budget and your savings goals. Talk to us today!

Canadian Scholarship Trust Plans are only sold by Prospectus. Investors should read the Prospectus before making an investment decision because it includes important detailed information.

The Canadian Scholarship Trust Foundation and its subsidiaries, C.S.T. Spark Inc. and C.S.T. Consultants Inc., operate under the master brand name CST. The terms “we”, “us” and “our” refer to CST.