For most people, planning for post-secondary education in Canada calls to mind an RESP. However, did you know that one can open an RESP for oneself? Whether it is to go back to school for career advancement, career change or lifelong learning, an RESP is a flexible and useful savings option. Although RESPs are generally used to save for a child’s education, it is actually possible to open an RESP in your own name, depending on certain conditions.
In this elaborate blog, we shall see how to open an RESP for yourself, its benefits, how to be eligible for it, and what to consider before opening it. If you are interested in a RESP for your own education program, then continue reading for everything you need to know.
Table of Contents
What Is a Registered Education Savings Plan (RESP)?
This is known as a Registered Education Savings Plan, or RESP for short. An RESP is actually a tax-sheltered savings account that allows Canadians to save for future post-secondary education. It makes the money invested grow tax-free until the money has to pay for any fees for education. Parents or guardians usually open RESP accounts for their children; however, there’s flexibility to how accounts may be used, such as opening one for yourself.
RESP offers other forms of government support, such as grants, including CESG and CLB. The target of these forms of grants is generally the saving of money to support families in financing their children’s education; however, adults planning to pursue further study have access to this support under specific conditions.
Can I Open a Registered Education Savings Plan (RESP) for Myself?
Yes, you can open a RESP for yourself in Canada. An RESP is not just for children or minors; it is available to anyone wanting to go back to school, for instance, to pursue a new career, enhance their skills, or fulfill a long-held academic goal. This could be a fantastic way to save towards education with tax benefits.
Unlike RESPs, which are generally associated with children’s education savings, adults who intend to enroll in an eligible post-secondary program will benefit if they open an RESP for themselves. The qualification is that you need to qualify as eligible for the post-secondary education requirements before you can withdraw the RESP funds for education.
Benefits of Opening an RESP for Yourself
If you’re thinking about returning to school or starting post-secondary education as an adult, opening an RESP for yourself comes with several advantages:
- Tax-Free Growth
Any money you contribute to your RESP grows tax-free while it remains in the account. This means your investment earnings, interest, and capital gains are not subject to tax while they’re inside the RESP, allowing your savings to grow faster.
- Flexibility in Contributions
There’s no mandatory annual contribution limit. While the maximum lifetime contribution per beneficiary is capped at $50,000, you have flexibility regarding how much and when you contribute. You can invest in your Registered Education Savings Plan at your own pace and according to your financial situation.
- Potential for Government Grants
Though CESG and CLB are more commonly associated with minors, adults may still be eligible for the CESG if they fall within the age criteria. The CESG provides a 20% grant on contributions up to a certain amount. While the total maximum CESG lifetime limit is $7,200 per beneficiary, it’s important to verify your eligibility before assuming you will receive these grants as an adult.
- Tax Advantages at Withdrawal
When you begin your studies and withdraw funds from your RESP, your contributions can be withdrawn tax-free. The earnings and government grants, however, are taxed in the hands of the student—who typically has a lower income, potentially leading to little or no tax being owed.
- Versatile Investment Options
Many plan providers accept and facilitate a variety of offered investment options, and these typically include mutual funds and GICs, as well as bonds and stocks. This way, you will adjust your RESP investment strategy as per your specific risk tolerance and financial goals to grow your savings according to the situation.
Eligibility Requirements for Opening an RESP for Yourself
To open an RESP for yourself, you must meet certain eligibility criteria. These include:
- Enrollment in a Post-Secondary Institution
The RESP is a savings plan designed to pay for post-secondary education. Therefore, to benefit from the plan, you must be enrolled in or intend to enroll in a qualifying educational institution. It encompasses universities and colleges, trade schools, and others recognized by Employment and Social Development Canada. The programs eligible are full-time or part-time and typically last more than three consecutive weeks.
- Valid Social Insurance Number (SIN)
To open an RESP, you need to provide a valid Social Insurance Number (SIN). Your RESP will be registered with the Canada Revenue Agency (CRA) using this number.
- No Age Limit for Contributions
There is no age restriction for establishing or making contributions to a RESP. However, government grants such as the CESG end when the beneficiary reaches age 17-that being you, in this instance. Your contributions to your Registered Education Savings Plan are permitted until your lifetime maximum contribution of $50,000, regardless of how old you may be.
How to Open a Registered Education Savings Plan (RESP) for Yourself
Opening an RESP for yourself is straightforward, and the process is similar to opening an RESP for a child. Here’s a step-by-step guide:
Step 1: Research Registered Education Savings Providers
First, you’ll need to find Registered Education Savings Providers that offer the type of RESP you want. Different providers have different fees, investment options, and contribution rules. Compare providers to find the one that best suits your needs.
Step 2: Choose the Type of RESP
There are two main types of RESPs:
- Individual RESP: This is the type you would open for yourself. You are both the subscriber and the beneficiary of the plan.
- Family RESP: This plan is for multiple beneficiaries but is typically designed for families saving for children. This would not be applicable in your case.
Step 3: Open Your Account
Once you’ve chosen a provider, you’ll need to open an RESP account. This will involve filling out an application form and providing your SIN and other personal details. The provider will register your RESP with the CRA.
Step 4: Begin Making Contributions
You can begin making contributions to your RESP once the account is open. Remember, you have flexibility with contributions, and you can make lump-sum payments or contribute regularly, depending on your financial situation.
Step 5: Start Investing
Depending on your provider, you can choose various investment options for your RESP. This could include low-risk options like GICs or higher-risk options like stocks or mutual funds, depending on your risk tolerance.
Considerations Before Opening an RESP for Yourself
While an RESP is a great way to save for your own education, there are a few things you should consider:
- CESG Eligibility
As mentioned earlier, the CESG is generally targeted toward minors. Adults may not always be eligible for these grants, depending on their age. If you are over 17, you will not qualify for the CESG, but you can still benefit from the tax-sheltered growth of your investments.
- Lifetime Contribution Limit
RESPs have a lifetime contribution limit of $50,000 per beneficiary. Ensure that your contributions stay within this limit. Unlike RRSPs, where unused contribution rooms can be carried forward, you cannot exceed this limit for RESPs.
- Investment Horizon
As an adult, your investment horizon (the length of time your money can stay invested) may be shorter than that of a child. You may need to choose lower-risk investments if you plan to use the funds within a few years.
- Other Savings Vehicles
Consider whether the RESP is the best savings vehicle for your educational needs. If you’re looking for flexibility and broader investment options, you might also look into other options, such as a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP).
Choosing the Right Registered Education Savings Providers
The right provider is important to maximize the benefit of your RESP. Registered Education Savings Providers are pretty wide open in terms of fees, investment options, and flexibility. RESP accounts are offered by some banks and credit unions, as well as some investment firms.
This should be compared to the following:
- Fees: Some providers charge management fees or other account-related costs.
- Investment Options: Look for a provider offering a range of investments that align with your risk tolerance.
- Customer Support: Ensure the provider offers good customer service and support, especially if you have questions about managing your RESP.
Final Thoughts
Opening up an RESP in your name if you reside in Canada remains the most popular way to save for post-secondary education. Whether you are looking forward to promoting your career further or starting a new learning journey, the RESP can help with tax benefits and allow flexible contributions. Although the Canada Education Savings Grant is not available for adults in some instances, the tax-free growth of your investments makes it a great savings vehicle. Discuss, therefore, various Registered Education Savings Plans with different providers and then settle on the best option based on your financial goals and educational plans.
Frequently Asked Questions (FAQs) About Opening an RESP for Yourself
Can I use an RESP to pay for online courses or non-degree programs?
Yes, as long as a qualifying post-secondary institution offers the course or program, RESP funds can be used for online or part-time courses.
What happens if I open an RESP for myself but decide not to attend school?
If you do not attend school, you can withdraw your contributions tax-free. However, any grants received will have to be returned to the government, and the investment earnings will be subject to tax and a 20% penalty.
How long can an RESP stay open?
An RESP can stay open for up to 36 years. This gives you plenty of time to return to school if you’re unsure about your immediate plans.
Can I transfer my RESP to another person if I don’t use it?
Yes, you can transfer your RESP to another family member, such as a sibling or a child, as long as they are under 21 and qualify as a beneficiary.
What expenses can I cover with RESP funds?
RESP funds can be used for tuition, books, and living expenses while attending a qualifying post-secondary institution. The money can also cover additional costs like transportation and other school-related fees.
Alicia Adamczyk is a New York City-based senior writer at Zobuz, covering money and careers. Prior to her role at Zobuz, Alicia worked as a senior money reporter at CNBC, and she held reporting roles at British Magazine and Lifehacker. She is a graduate of the University of Michigan.
