Group RESP Benefits You May Not Know About

Investing money for future financial goals like retirement or a child’s education may seem a little scary, especially with market volatility making headlines. However, successful long-term RESP investments may not need to take the investment rollercoaster ride you read about.  Many factors contribute to group RESP growth, including pooled contributions, investment selection and returns, and making the most of federal and provincial education grants.

What is a Group RESP?

Group RESPs use what’s known as a pooled fund strategy; this allows fund managers to pool all the contributions made by subscribers, plus any government grants. Investments are made with the pooled contributions, and subscribers hold units of the fund.

Group RESP Benefits

A group RESP benefits investors in several ways. Firstly, the larger pooled amount gives them access to a wider selection of investments than they may have individually. This is because some investments require a high initial contribution that may take a long time for one subscriber to accumulate. With a pooled fund, individual contributions, along with those of other subscribers, lets subscribers participate in these investments immediately.

Some group  RESPs also offer flexible contribution choices,  which works well if you plan to grow your RESP with the help of  income tax refunds, annual performance bonuses, or other lump-sum contributions that may occur on an irregular basis.  Other contribution plans include monthly, annual, and single-lump-sum (one time) contributions, as well as a five and ten-year options.

Another way a group RESP benefits investors is through flexibility in RESP withdrawals. The wide variety of payout options (depending on the beneficiary’s educational choices, plan contents, and maturity date), allow you to make the best choices to suit your own situation.

Grow Your RESP With Federal and Provincial Grants

Maximize your group RESP growth by taking advantage of all the federal and provincial grants you may be entitled to. This depends on factors such as your family net income,  where you live in Canada, etc.  You may end up qualifying for federal grants such as the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). Provincial grants include the Quebec Education Savings Incentive (QESI), and the British Columbia Training and Education Savings Grant (BCTESG).  Talk to your RESP registered Heritage Dealing Representative to ensure you’re getting all the grants you’re eligible for.

Lower Risk Investments can Equal Steady Growth and Returns

The ups and downs of the markets could make some investors queasy, but many fund managers invest the pooled funds of subscribers’ contributions and government grants in a variety of lower risk vehicles, such as provincial and federal bonds and guaranteed investment certificates (GICs).  The pooled income may also be invested in Canadian equities and U.S. and Canadian exchange traded funds (ETFs) equities.