Many Canadians do not have registered education savings plans (RESP) set up for their children, because they don’t realize the potential benefits of the savings vehicle, such as government grants.
That’s according to a study released Thursday by Toronto-based BMO Financial Group.
According to BMO, 76% of Canadian parents with children 18 years of age or older have not opened RESP accounts to help pay for post-secondary education.
Many parents end up putting off opening an RESP because they are focused on the daily routine of raising their children, says Larry Moser, regional sales manager, BMO Financial Group, in Ottawa, and something like university seems too far away to worry about.
More clients would be likely to open an RESP, according to BMO, if the various government benefits were properly explained to them.
For instance, study results show that 37% of Canadian parents are unaware that the government provides a grant of up to $500 for the first $2,500 contributed to an RESP each year. Of those parents, 65% said they would have set up an RESP had they been aware of the grants.
“One of the most important things advisors can do,” says Moser, “is tell [clients] about the grant and let [them] know how to get the most of it.”
Once the RESP is set up, advisors can help clients establish a routine to maximize the benefits of the savings vehicle for their clients and their children. Moser says setting up an automatic savings plan where a certain amount comes out of the client’s bank account each week or month is a great way for clients to save in an RESP.
While it’s best to encourage clients to open an RESP account as soon as a child is born, says Moser, clients shouldn’t feel it’s ever too late to get started saving for a child’s education. “Whenever you can start you really want to do that,” he says. “The important part is always doing it one way [or another] and not just ignoring [the RESP] altogether.”