The cost of post-secondary education in Canada continues to climb. Chances are good you already know this. In fact, I know many of you have been saving or putting money away into a Registered Education Savings Plan (RESP) for years. And, you are not alone. Many parents and grandparents are trying to save as much as they can in an RESP so that kids and grandkids can continue their education after high school without the burden of student loans.
RESPs are a great savings tool. There are federal government grants that can help top up your funds and that can help you maximize your contributions. But have you ever given any thought to how safe those savings are? Don’t panic. There’s a Crown corporation called the Canada Deposit Insurance Corporation (CDIC), which protects eligible deposits in Canadian banks in the unlikely event of a bank failure.
I know, you’re probably thinking, “banks don’t fail!” Well, in the 50-year history of the Canada Deposit Insurance Corporation, they have handled 43 failures of Canadian financial institutions and not one dollar under CDIC protection was lost. The last incident of failure was in 1996, so while it hasn’t happened recently, it can happen.
The CDIC protects deposits in seven different categories at over 80 member financial institutions in Canada, up to $100,000 per category, per member. But how do RESPs fit in? Well, if your child’s RESP is set up as a trust (trusts being one of the seven protection categories), eligible deposits in the account are covered by CDIC! Eligible deposits in an RESP could include cash deposits or GICs with a term of 5 years or less. Trust accounts are protected up to $100,000 per beneficiary. This means that if you have three RESPs for three different children, you could have up to $300,000 of protected savings.
One important thing to note about CDIC coverage is that not everything is covered. Many RESP accounts contain mutual funds, which are NOT protected by CDIC. Other products not covered include stocks, bonds, term deposits greater than 5 years, and foreign currency deposits.
Find Out if Your RESP is Covered by Canada Deposit Insurance Corporation
So now that you are armed with this information, what should you do? First, if you already have an RESP, check CDIC’s list of members to see if your bank is included, and then check with your bank to find out if the RESP is structured as a trust and has a beneficiary. Lastly, use CDIC’s online estimator to calculate your RESP coverage, and coverage of all your other accounts as well.
Happy saving!
This post has been sponsored by the CDIC and as such is compensated. My opinion is all my own and it is also truthful.