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Is your child's RESP protected? Here's how to find out

Not all financial institutions are insured in the event of a bank failure.

Is your child's RESP protected? Here's how to find out
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Let’s face it. having kids ain’t cheap. One of the biggest expenses to save up for is your child's post-secondary education—even more so if you have multiple kids. Many parents choose to go with a Registered Education Savings Plan, or RESP, as a tax-sheltered way to save funds and access government grants and incentives. By doing so, we assume we’re keeping that money safe for our children’s future. For the most part, that’s true—because the Canada Deposit Insurance Corporation (CDIC) provides this important assurance to Canadians.

So what happens if the financial institution that holds your RESP goes under? What happens to all your hard-earned money? That’s where the CDIC comes in. The CDIC is a Crown corporation that automatically insures eligible deposits so that in the event of a bank failure, Canadians’ money is protected. However, not all deposits are eligible and not all financial institutions are covered.

What’s covered by CDIC?

Funds in savings and chequing accounts, Guaranteed Investment Certificates (GICs) and other term deposits, and money held in foreign currency accounts are all eligible. Additionally, term deposits and GICs within RESPs are protected, as well as those within RRSPs and RDSPs (savings for a person with disabilities). 

There are eight eligible categories—for example, accounts in one individual’s name or joint accounts or RESPs—each with its own $100,000 limit per member bank. Deposits at each different bank are insured separately—and not subject to a cumulative limit—but accounts in the same category, held at the same financial institution, are cumulatively capped at $100,000. Luckily, RESPs are protected per beneficiary, so you can have two RESPs for two different children covered for $100,000 each at the same institution.

What isn’t protected?

Investment products such as stocks, mutual funds, ETFs and cryptocurrency are not covered by CDIC, including any such investments within RESPs. That’s why it’s important to understand what types of financial products make up your RESPs to know what CDIC coverage you have.

So how do you get CDIC coverage? It’s simple. Keep your funds in an eligible account at a CDIC member institution—no sign-up is required. Just make sure to check the CDIC member registry or confirm with your financial institution that it is a CDIC member before making a deposit. 

And there’s no charge to you for CDIC protection. Member financial institutions, including banks, federally regulated credit unions and loan and trust companies, pay the premiums on deposit insurance. After all, financial security is critical both for individuals and the economy as a whole. If a bank collapses, the potential effects could be devastating. That’s why CDIC exists. Since its inception in 1967, CDIC has handled 43 bank failures affecting more than two million depositors. Not a single dollar under CDIC protection has been lost. 

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So feel confident about growing your savings and contributing to your children’s RESP deposits. Come high school graduation, they will have secure funds to access for their post-secondary education. Learn more at cdic.ca.

This article was originally published on Mar 22, 2023

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