The potential drawbacks and risks of an RESP
A Registered Education Savings Plan (RESP) is a type of savings plan that can help you save for your child's education.
While RESPs have many potential benefits, there are also some potential drawbacks and risks that you should be aware of.
One potential drawback of an RESP is that the money in the plan is not accessible until your child is ready to go to post-secondary school.
This means that if you need to access the money for other purposes, you may have to withdraw it and pay back any government grants and income earned on the plan.
This could result in a loss of potential earnings and a tax bill.
Another potential risk of an RESP is that the money in the plan is not guaranteed.
The value of the investments in an RESP can go up or down, and there is no guarantee that you will earn a return on your investment.
This means that there is a risk that you may not have enough money in the plan to cover your child's education costs.
Additionally, there are rules and restrictions that apply to RESPs.
For example, there is a lifetime limit on the amount you can contribute to an RESP, and there are restrictions on how the money can be used.
If you don't follow the rules and restrictions, you may have to pay back government grants and may be subject to other penalties.
In conclusion, while RESPs have many potential benefits, there are also potential drawbacks and risks that you should be aware of.
It's important to carefully consider these potential drawbacks and risks before deciding if an RESP is right for you and your child.