To plan for your child’s university education is to believe in the possibilities of tomorrow. A Registered Education Savings Plan (RESP) is a smart way to make the difference between dreaming and doing. Today I’m teaming up with Embark for some #MomLife real talk on everything you want (and need!) to know about RESPs.
As Elle’s grade two winter break swiftly approaches, I can’t help but be a little surprised by how quickly we got here. Here I go, getting sentimental again but childhood is such a short season, isn’t it?
How fast the years go is something we hear often from other parents – a reminder to savour these early days while our children are little, while looking ahead and planning for when they grow up. For us, an important part of that has been saving for their future education.
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Knowing how expensive a post-secondary education can be, Aaron and I opened an Embark Student Plan for Elle and Emmett.
It’s two things we love: easy and online. And two things we need: guided by experts and tailored to our needs.
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If you’re like me and want a better grasp on RESPs before making a long-term financial decision, I’ve teamed up with Embark to share a digestible, easy-to-understand overview so you can feel confident about starting to save!
RESP Overview with Embark
Understanding RESPs: Um, What Are They Exactly?
A RESP is an investment account specifically designed to help save for a child’s post-secondary education. You can open one for your child as soon as they have a social insurance number (SIN).
In addition to the money, you invest and grow, the Canadian government also contributes funds in the form of education grants (which is incredible!!!). For us, government grant money was a BIG draw for investing through a RESP versus a Tax-Free Savings Account (TFSA) or traditional Savings Account.
Right off the bat, the government will match 20% of the first $2,500 you put into your RESP every year, giving you up to a maximum of $7,200 over the lifetime of your RESP through the Canada Education Savings Grant.
You can contribute a lifetime maximum of $50,000 per beneficiary into the account, which grows tax-sheltered until the funds are withdrawn, when they’re taxed at your child’s marginal tax rate. Since many students have little or no other income, they can usually withdraw money from the RESP and pay little-to-nothing in taxes.
Family vs Individual RESP Plans
Family RESP Plans
Embark offers both Family RESP and Individual RESP plans. If you’re looking to open a plan for your own family like we did (or if you’re a grandparent looking to invest in your grandchildren), a Family RESP will most likely be the best fit.
These plans allow you to save for many children in one plan, so long as they’re siblings by blood or adoption, and can only be opened by a parent, grandparent or sibling.
A great advantage of this plan is that earnings and grants (up to $7,200 for the Canada Education Savings Grant) can be shared amongst the children. This means that if Emmett doesn’t attend post-secondary, or he doesn’t need all his funds, the remaining money can be used for Elle’s education.
In fact, you can actually add children to the plan if you have more, future-proofing your savings plan. So even if you only have one child now, you may still want to start a family plan if you’re expecting or think you want a bigger family in the future.
Individual RESP Plans
Individual RESP plans can be opened for a single child by anyone. This plan can be opened by aunts, uncles, friends or godparents – really, anyone who wants to invest in the future education of a special child in their life. The subscriber also does not need to be related to the child.
If you want to save for your own post-secondary education, you can also open an Individual RESP plan for yourself.
Why My Family Is Using Embark To Plan and Save for the Future
I’m going to be honest – over the years, I’ve had some very frustrating experiences with my bank. Why must everything still be so antiquated? I swear, I either have to book an in-person meeting (which is annoying with two kids) or talk to about 5 people on the phone until I reach someone who can help me, who then suggests an in-person meeting.
I think the desire for something easier and more streamlined is why I was so immediately drawn to Embark’s online platform. The fact that I can:
- talk to an expert
- budget
- schedule a one-time or automatic contribution
- project my earnings
- and even withdraw the money,
all from my living room is so convenient.
I really like how Embark’s innovative digital platform puts education planning and saving right at your fingertips.
Plus, at Embark, education savings is all they do and they make getting started really easy.
How to Get Started with Embark
Signing up was a simple, streamlined process. It takes about ten minutes to set up online here once you have all your information handy.
You’ll need:
● Your valid Social Insurance Number (SIN)
● Your government-issued ID, such as a driver’s license
● The SIN of each child your saving for
● Personal information for you and your children
Once I set up my account, I chose to hop on a call to chat further with an Embark rep. But if you feel confident and knowledgeable about how much you’d like to save and how often, you can begin contributing immediately!
And then anytime you want to see how your investment is performing, simply log into your dashboard and all the details about its growth is there for you to see!
Tell Me More About These Government Grants
I mentioned it before but I’m going to chat about it again because this was a huge draw for us: one of the main advantages of opening a RESP is that it’s eligible for government grants. Right from the get-go, the government will match 20% of the first $2,500 you put into your RESP every year, giving you up to a maximum of $500 per year and $7,200 by December of the year your child turns 17 via the Canada Education Savings Grant (CESG).
Depending on your household income and the province you live in, you may also be eligible for even more, including:
- Additional CESG for lower and middle-income families
- The Canada Learning Bond
- The Quebec Education Savings Incentive
- The British Columbia Training and Education Savings Grant
Once you set up your Embark Student Plan, the team will automatically apply for these grants on your behalf!
Deep dive into the different grants here.
When Should I Start Saving?
I’m grateful to my father-in-law who encouraged us to start thinking about education savings early. I know how it feels to be hyper-focused on expenses related to immediate needs, as opposed to planning ahead for the future – especially during those early days when you’re budgeting around maternity leave and the extra expenses that come with parenting.
However, the best first step – as with most things – is simply to get started.
Now is better than never and a great first step is to hop on a call with the Embark team. I really liked having the opportunity to ask allllll the questions so that everything clicked for me about the saving decisions we were making.
How To Switch Funds Over To Embark
Looking to switch over funds to Embark? All they need is your most recent RESP statement from your bank.
For every $10,000 you transfer, Embark will deposit $100 into your new Embark RESP, up to a maximum of $500. Talk about a good incentive!
What Happens If My Child Doesn’t End Up Going to Post-Secondary?
I’m including this question because it’s something I asked on my latest phone chat with Embark. While Aaron and I both went to university, I know many successful people in my life who didn’t pursue a post-secondary education. I found it interesting to know that a RESP can remain open for 35 years, which is good news if your student postpones or prolongs their education.
However, if your child decides that pursuing a post-secondary education isn’t in their cards, you can either:
- transfer the funds to another child
- put it towards your registered retirement savings plan (RRSP) if you have the room)
- withdraw your investment income at an elevated tax rate. Grants and grant income will always be clawed back by the government if they’re not used by your child during their education
This all sounds great, anything else?
Yes! In partnering with Embark, I’m actually really happy to tell you all that we’ve put something together to help you kickstart your child’s savings.
When opening a new account, use the promo code chandeliersandchampagne23 and Embark will contribute $100 towards your child’s education when you save $200. You can find out more about this here: www.embark.ca/chandeliersandchampagne
I hope you enjoyed this deep dive into all things RESPs with Embark. If you have any questions, be sure to reach out in the comments below or book a virtual appointment with a knowledgeable Embark staff member.
As well, a big thank you to Embark for partnering with me on this post. As always, all thoughts are my own.
Xo Holly Hunka
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Embark is a pretty well-known RESP predatory firm, beware. Please do your due diligence.