Group plan—A group plan, also known as a pooled or scholarship plan, is intended to be used for just one child and he/she doesn’t need to be related. In this type of plan, your savings are combined with others. But unlike a family or individual plan, you don’t choose the investments and you must contribute a certain amount over a specific period of time. You can only get this type of plan at a scholarship plan dealer.

Group RESP pros

There are some advantages with group RESPs. For instance, you’re forced to save money because you agree to buy a certain number of units (like shares) on a regular basis. If other people leave the plan early, you could receive a share of their earnings. And if you’re unsure how to invest, someone else will take care of all the investment decisions.

Group RESP cons

But while there are some advantages of group RESPs, there are also many disadvantages.

Group RESPs will often invest in only fixed-income products (for example, GICs and bonds). In today’s low-interest rate environment, that’s not going to produce very high returns if you’re investing for five years or more.

You also must make regular contributions. But if you miss a contribution for any reason, you could be forced to pay a penalty and interest on the contribution to stay in the plan. Your plan could also be terminated and you might have to give up your investment earnings.

While there are a number of similar fees you need to pay a financial institution or a scholarship plan dealer, there are also some different fees associated with both.

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