Study finds few accessing RESPs

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Burdened with student debt because you don’t have an RESP (Registered Education Savings Plan)? You’re not alone.

Recent research by the BMO Financial Group has found that two-thirds of post-secondary students do not have an RESP, a number which BMO vice president: managed solutions and registered plans strategy, Robert Armstrong, felt to be unexpectedly low.

“I was a little bit surprised … I was hoping for a much higher number,” he said.

The study, which was conducted online with a sample size of 602 Canadian post-secondary students, also found that 84 per cent of students without an RESP wished they had one, while three-quarters of those who had one said they couldn’t have otherwise afforded university or college.

Armstrong believes that part of the struggle is simply opening the account.

“We’ve actually worked with a lot of people in the past who have said times are tough, it’s hard to find that little bit of money,” he said. “But I think the hardest thing sometimes is just starting up an RESP and opening an account.”

One of the main benefits of an RESP is the associated government grants.

The Canada Education Savings Grant (CESG) adds between 20 and 40 per cent of the amount in the RESP, up to a lifetime maximum of $7,200. Accounts may also be eligible to receive an initial $500 contribution, with an additional $100 per year, through the Canada Learning Bond.

However, in order to reap these rewards, certain stipulations have to be met. And of course, the more you put in, the more you get out. For some families, this may not be a feasible option.

“If you’re from a low-income family, it’s very difficult to put money aside into an RESP for future use,” commented Ruth MacNeil, the associate registrar: awards at Wilfrid Laurier University. “If your financial situation is, ‘I have to put food on the table this week, I can’t worry about next year,’ then you’re probably going to be overlooking those types of things like an RESP.”

At Laurier, MacNeil has found that far more students are using OSAP than drawing on RESPs for financial aid. While over 50 per cent of the student population uses OSAP, with applications up by over 200 per cent since 2004, only about 17 per cent use RESPs.

MacNeil continued, “OSAP is based on financial need, it’s basically based on parental income levels and student income levels and those individuals who are in low-income situations will receive far greater amounts of OSAP funding than others. RESP is a great vehicle, but a family has to be able to afford to do it.”

Armstrong, however, is confident that the number of people setting up RESPs will continue to increase. The study revealed that the vast majority of students polled — just over 90 per cent — intended to set up an RESP for their own children.

Felicia Clement, a fourth-year university student, said that it’s something she would consider.

“I think I would definitely contemplate it … based on how difficult it’s been for me to finance my education,” she said.

Although Clement does have an RESP, which she has used, in part, to finance her education, she has also worked throughout her undergraduate degree and accesses loans through OSAP.
Her parents were only able to start the fund for her because of inheritance money they received, but weren’t able to contribute enough to get the benefit of grants offered through the program.

“I don’t think that people see a need for something until they actually experience the need. And so, the students right now understand they have to pay for their education, it’s not free,” said Armstrong.

“And I think a lot of them now see that an RESP is free money on the table that they might not have known about, but now that they do know, they’re going to take advantage of it for their own children.”

Armstrong affirmed that BMO will continue to do research into RESPs in hopes that more people will access them as a means to fund post-secondary education.


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