THE FACTS

• An Education Savings Plan registered under the Federal Income Tax Act.
• Allows savings and interest to compound tax free.
• Qualifies for a Canada Education Savings Grant that provides a 20% top-up on the first $2000 deposited annually per child.
• All interest is paid to the student (your child) and is taxed at their rate, which could attract little or no tax.
• Return of and/or rollover to an RRSP of the interest if the nominee (your child) doesn't advance to post-secondary education under certain conditions and circumstances.

THE BENEFITS

• Tax free growth:
  Interest compounds tax-free in the Plan.
• Income splitting:
  Interest that would be attributed to a subscriber in a regular savings plan is attributed to the nominee (the student) in an RESP.
• Guaranteed:
  Principal invested in fully insured or government guaranteed securities.
• Affordable:
  Saving plan and corresponding deposit schedule based on each individual's budget.
• Greater growth:
  20% top-up on the first $2000 deposited annually per child.
• Motivational:
  Most important over 85% of children with mature CST plans actually enroll in post-secondary education, and of those 94% graduate.

TYPES OF RESPs

Group

• Fully secured investments
• Form of forced savings
• Tontine principle can add to yield
• Limited investment knowledge required
• Sponsored by non-profit organization

Self-Directed

• Can invest in non-secured investments
• No requirement to save regularly
• Needs more knowledge of investment in general and more time to monitor investments
• Sponsored by for-profit organization

MUTUAL FUNDS

Pros

• Investment diversification
• Liquidity
• Flexibility
• Potential higher returns

Cons

• Potential of lower returns
• Complacency of investor
• Investors sometimes have no real idea in what they are investing
• Theories and predictions are not often questioned
• For profit
• Impact of MER

BANKS

Pros

• Accessibility
• Liquidity
• Variety of Investments

Cons

• High Service Charges
• Informal Service
• New to the RESP market
• For profit
• No requirements to continue to save over the years