Back-to-School Season: Answering Your Top Questions

As we dive into the back-to-school season, we’re tackling the top questions our customers at Emark ask us. From what a Registered Education Savings Plan (RESP) can be used for to who can contribute, we’ve got you covered.

Using a Registered Education Savings Plan (RESP)

A Registered Education Savings Plan (RESP) is an excellent way to save for your child’s education. But what can you use it for? The answer is: almost all education-related costs, not just tuition fees. Tuition fees are one of the biggest expenses, and it’s one of the main reasons parents and grandparents open an RESP. For the 2024/2025 academic year, the average tuition fee for a full-time student in Canada was $7,360, according to Statistics Canada. These costs have been increasing every year, with some professional programs costing significantly more than others.

You can use an RESP to cover costs at post-secondary institutions that aren’t colleges or universities, like commercial schools, as long as they’re recognized by the Canadian government. If your child wants to study outside of Canada, you can also use an RESP for programs that are at least 13 weeks long (or three weeks for university programs).

In addition to tuition fees, an RESP can be used to pay for:

• Rent or residence fees
• Food and living expenses
• Textbooks and school materials
• Tools and equipment
• Transportation costs
• Sports or activity fees
• Tech devices and more

As long as you meet the payout requirements (more on that later), the possibilities are endless.

Who Can Contribute to an RESP?

Anyone can contribute to an RESP, up to the lifetime limit of $50,000 per child. Typically, parents open an RESP for their child, but grandparents, aunts, uncles, family friends, or anyone else who wants to help out can also contribute.

If you’re a grandparent, aunt, uncle, or family friend who wants to contribute, it’s a good idea to coordinate with the parents to avoid over-contributing. If there are multiple contributors to an RESP and the total contributions exceed the lifetime limit, the Canada Revenue Agency (CRA) will impose a tax of 1% of the excess amount per month on the total amount until the excess is withdrawn. You don’t want that to happen to your gift, right?

More Questions Answered

We’ll be answering more of your top questions about RESPs in the coming sections, including what the payout requirements are and how to avoid penalties.

Conclusion

In conclusion, a Registered Education Savings Plan (RESP) is a versatile and valuable tool for saving for your child’s education. With its flexibility and potential for growth, it’s an excellent way to invest in your child’s future. By understanding what an RESP can be used for and who can contribute, you can make the most of this opportunity and set your child up for success. Stay tuned for more answers to your top questions about RESPs.