Posted on: March 27, 2015, by : Melody B

The Benefits and Pitfalls of RESPs

Registered Education Savings Plans, perhaps the most popular of all savings vehicles for helping one save for post-secondary education, have been touted as the “Go To” savings vehicle.  But while all RESPs are beneficial, certain RESP products can be quite restrictive, often limiting the extent to which they are effective.  This is why it’s essential that parents understand the RESP product before purchasing.  An easy way to remember what to ask for before making your purchase is below:

R – Restrictions – Understand what you can and can’t do.  Some RESPs are restrictive in terms of contributions and withdrawals

E – Education Full-Time Definition – Understand the definition of what full time education is.  This definition can vary across providers, and can affect to what extent you receive RESP benefits

S – Surrender Charges – Be sure to know what the costs are in the event your situation changes or another product is introduced to the market that better suits your needs

P – Principal Protection – Is your principal protected and, if so, how? The last thing you’d want is to have an RESP that collapses due to market volatility right when you need the money most