Weighing Up Your RESP Options – Individual, Family or Group?


Without a doubt, a registered education savings plan (RESP) is one of the best ways of preparing for your child’s college education. As you may know, you have three types of plans to choose from: individual, which covers only one child; family, which covers all children in a family, saving you fees; and group, where contributions go into a group plan that is combined and invested with other members’ contributions.

If you want more control over your investment, individual and family plans work the best. These registered education savings plan let you select from a whole range of investment options, from savings accounts to stocks to GICs, and the rest. If you manage your RESP yourself, you determine what investments to make, how much to contribute and when. If your child is no older than eight, it may comfortable to hold up to half of your RESP in stocks, which present a greater growth potential. They can be risky though because you may lose some of your investment when a stock price dives.

As your child nears high school graduation, it would be smart to stay safe by going for low-risk options, like GICS, government bonds and money market funds. If you decide to take this option, make sure you know the fees and keep in mind that any fee will be deducted from your potential earnings.

With a group plan, you contribute a particular amount based on a fixed schedule – for example, $80 monthly for 15 years. The plan dictates the amount to be invested, usually low-risk investments like bonds, T-bills (treasury bills), and GICs. Be sure to review the fine print. A lot of registered education savings plan enforce penalties for missed payments or may even terminate your plan altogether. Among the main disadvantages of a group plan is that you lose investment options.

RESPs are applicable to various post-secondary courses, but in case your child decides he doesn’t want to go to college, you should know what happens to your plan. If you picked an individual plan, any CESG money you may have received will have to be returned. All your contributions will as well be returned to you, tax-free, but any income you earned from the plan will be taxed. If you picked a family plan, all of the plan’s assets can be allotted to any other child who is named in the plan. Check out this website at http://www.huffingtonpost.com/section/education and know more about education.

If you selected a group plan, you will get all your contributions back, tax-free, but lose all grants and income earned (any money returned from your group plan will go back to the pool to be used by other members). As always, read the fine print. Group plans can add restrictions on qualifying post-secondary programs, and that can limit your child’s options when the time comes for him to choose.


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