First, they are tax havens, that is, the growth on the account is not taxed. Another is that, thanks to the Canada Education Savings Grant (CESG) program, the government also contributes to these accounts. How much the government contributes depends on the income of the account creator. The Canada Learning Bond increases the government's contributions even more for low income parents. The fact that the accounts do not have to be actively managed, like a stock investment portfolio would, is also an advantage for many parents with no interest or time to learn the ins and outs of investing.
RESPs are a great way to save money for your children's future, it's true. Follow the link for more information on heritage education scam. There are RESP organizations, however, that have generated complaints because of the way they manage these accounts. Increasing complaints about these RESP groups led to a government investigation into the industry and a promise from said industry to reform itself in 2007.
That said, there are still RESP organizations that continue to receive criticisms for the way they do business. For the most part, transparency, flexibility, and fees are the three main causes for concern. To avoid being one of the people who feels as if they have been ripped off by one of these groups, make sure you do your research and choose carefully.
Some people find the contracts difficult to understand. The contracts can be hard to read, both because of length and because they are written to be hard to parse. People who speak English as a second language may find them impossible to fully understand. Critics say that representatives and agents of these companies are not any more forthcoming in person or over the phone and won't always disclose all of the information you would need to make an informed decision.
Some RESPs are also inflexible. Some organizations make it very difficult or costly to change the contribution rules you originally agreed to. For example, you may want to change how much you contribute each month, or change to a different schedule, but find that doing so results in penalties. You many also be charged penalties for terminating your account before it reaches maturity.
Which leads to the third major criticism: fees and penalties. You can end up paying thousands of dollars in enrollment fees over the length of the investment, with the bulk of these payments happening up front. Those fees may end up coming back to you in the form of payouts to your beneficiary if all the conditions are met, but for those who, for whatever reason, fail to meet the requirements, they may never see that money again. Learn More about the registered education savings plan. There are also early termination fees for some accounts, which can also cut into your savings if you decide for whatever reason that you can no longer support the investment.
No doubt that RESP is the best savings programs for the education of your children.
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