Refinements to Canada’s Registered Education Savings Plan (RESP) program have made it an effective savings vehicle, but Canadians are not taking full advantage of the program due to poor awareness and understanding, concludes a study conducted by the Certified General Accountants Association of Canada (CGA-Canada).

“Canada’s RESP program provides families with a relatively secure savings option dedicated specifically to education,” says Rock Lefebvre, CGA-Canada’s vice president, research and standards. “In fact, due to refinements in the program over the years, it is a particularly effective savings vehicle for lower income families. As a result, it is doing a good job of meeting its objective of making post-secondary education more affordable and accessible to Canadians.”

International comparisons also support this view as Canada’s RESP program is ranked as one of the most generous savings plans across all countries of the Organization for Economic Cooperation and Development.

Despite this effectiveness though, the public’s awareness and understanding of RESPs is becoming a growing concern, CGA-Canada says.

“Since the RESP program is comprised of several components, most people lack a clear understanding of how it works and what the benefits to them would be,” says Lefebvre, who co-authored the association’s RESP paper.

“This is particularly true with the very people who stand to benefit the most from the RESP program, lower income Canadians.”

Savings bonuses offered by the federal government through the Canadian Education Savings Grant (CESG) allow families to grow their investment in part through government contributions, an attractive feature that is not available through any other plan.

For lower income Canadians, these government contributions can form a significant amount of their investment gains, CGA-Canada notes.

The paper raises one other cautionary note. Rising tuition fees are countering the benefits of the RESP program and need to be addressed directly. Measures taken in the United Kingdom may serve as a good example for addressing this challenge, notes the paper.

CGA-Canada serves 73,000 Certified General Accountants and students in Canada and more than 80 countries.

IE