RESPs: Start small, if you must, but start early

If you can afford it, consider a $50,000 lump sum.

Vikram Barhat 5 March, 2014 | 7:00PM

The cost of a four-year university program for a child born today could be a staggering $150,000, according to a study by the Canadian Scholarship Trust Foundation. To make higher learning more affordable, registered education savings plans (RESPs) enable Canadians to benefit from government grants and tax-advantaged growth.

There are two main types of RESPs. One is an individual or family plan in which you decide what securities or other assets to hold. These are available from banks, brokerages, mutual-fund dealers and other financial-services providers. With these plans, the timing and amounts of both contributions and withdrawals are up to you.

The other main type is scholarship plans, for which you sign a contract with a provider that makes investments for you. With group plans, your contributions are pooled with those of many other subscribers, and there are specific contribution requirements and a common maturity date. With individual and family scholarship plans, you have flexibility to decide when to contribute and when to make withdrawals.

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About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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