Scholarship (Group) RESPs

Posted 21 Aug 2014 by Natalie LeBlanc

At this time of year, as recent high school graduates make their plans for decorating their dorm room, they (and their parents!) are also thinking about the tuition bill due in September. Hopefully, you've prepared by saving ahead of time using one of the many education savings vehicles available to Canadians. One of the most popular is a Registered Education Savings Plan, or RESP. However, there are other types of plans with their own benefits and demerits as well, such as a Scholarship or Group plan. Which one is right for you depends on your needs.

Scholarship Plans and Group Plans are often promoted at parenting trade shows (even at the hospital when your baby is born!) and have the benefit of pooling your contribution with others saving for their children's education as well. However, these plans are more limited in your control over your contributions along with some other factors. For example, with some plans, if you miss or want to change your contribution schedule, you forfeit the grants (Canada Education Savings Grants) that were added to your contributions. Some parents even find out too late that switching programs, or even a strike at the university causing an interruption in classes, cause their child to lose their eligibility to receive payments from the plan.

In addition, you might not be able control how your money is invested; it could be in a low-risk/low-return fund while you are a more aggressive investor. The fees associated with these accounts tend to be higher as well, including fees for enrolment in the plan, administration, and deposits, which are all paid up front from your contribution.

On the flip side, RESPs, both individual and family-based, allow you much more control over your investments held, your contribution schedule, and the programs and schools that qualify. If you'd like to discuss if an RESP is right for your savings goals, give us a call!