Over 113,000 new RESPs opened across Canada

TORONTO, ON – Four of the leading providers of group Registered Education Savings Plans in Canada delivered an impressive $160,910,503 dollars in Education Assistance Payments to more than 58,000 post-secondary students across Canada last year. The total payout amount represented an increase of 5.3 per cent over the same period in the previous year. Additionally, more than 113,000 new plans were established between November 1, 2005 and October 31, 2006.

The numbers were tallied by the Registered Education Savings Plan Dealers Association of Canada (RESPDAC), of which all four companies are members. The four members of the association include C.S.T. Consultants Inc., Children’s Education Funds Inc., Heritage Education Funds Inc., and USC Education Savings Plans Inc.

“Our numbers continue to grow, and with good reason,” said Peter Lewis, newly elected Chair of RESPDAC. “Education savings plans have been available in Canada for over forty years, but it’s really just been within the last nine years that families have responded in record numbers. This is thanks in part to extra incentives being provided by the federal government, and by more and more provinces.

“But it’s also partly due to the fact that a whole second generation is saving for their kids now – that is, the first generation of parents who benefited from RESPs are now parents saving for their own children.”

Post-secondary education has become a much greater priority for Canadian students over the last several years. A 2002 study by Human Resources Development Canada estimated that more than 70 per cent of new jobs created in Canada now require some form of post-secondary education. Yet the cost of college or university education has also become a greater challenge for students and their parents, continually outpacing the rate of general inflation.

According to Statistics Canada, the national average of university tuition and fees alone (not including residence and other living costs) is nearly $4,400 in Canada today.

Financial planners caution their clients that the cost can go up to more than $14,000 peryear, when residence and other expenses are added. At a 5% rate of escalation, those tuition and living expenses could increase to a total of over $120,000 for a child born today, and enrolling in a four-year university program in 2024!

However, investing in RESPs is at least one method of making the post-secondary experience more accessible for the average Canadian family.

The members of RESPDAC all provide group scholarship savings plans – in which a family’s contributions are pooled with those of other investors. The cumulative funds are invested in secure, conservative interest-bearing securities such as government bonds, GICs and treasury bills.

Families can also benefit from the federal government’s Canada Education Savings Grant, which can pay up to $500 per year, depending on the size of the investor’s contribution and the family income. There’s also the Canada Learning Bond, which may apply to low- and middle-income families who qualify for the National Child Benefit Supplement. And finally, Alberta and Quebec have introduced provincial programs to assist families to save for post-secondary studies.

“Without an RESP for each of their children, many Canadian families simply could not afford to send their kids to college or university – it’s as simple as that,” said Mr. Lewis. “But all of us in the RESP Dealers Association are pleased and gratified that more and more families are looking at education savings plans as a necessary and integral part of their financial planning.

“And we’re equally proud of the students who graduate and go on to contribute to Canadian society, thanks to the post-secondary education they’ve received.”