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RESP

A registered education savings plan that has been registered with the Canada Revenue Agency (CRA) is an investment vehicle where parents or grand parents can save for their child or grand child post-secondary education. It is a convenient way to save for future – A tool that allows your child to dream big.

Registered Education Savings Plan

  • All children resident in Canada (up to the end of the calendar year in which they turn 17) are eligible to receive money from the federal government for their post secondary education as long as RESP has been opened for them.
  • You can open a RESP for a child or grandchild
  • You can contribute a lifetime maximum of $50,000 per child (beneficiary) to an RESP.
  • You can contribute to a RESP for up to 31 years, and plan remain open for maximum 35 years.
  • The amount of annual contribution room that is eligible for the Canadian Education Savings Grant (CESG) is $2,500. You can contribute more, but the 20% grant is only matched by the Canadian government up to $2,500 per year.
  • Government of Canada contributes up to $2,000 to a RESP for an eligible child from low income families.
  • There is no tax deductible for the contributions, however the money inside the plan will grow tax deferred until its withdrawn for a post-secondary educational program.
  • Your child (beneficiary) pay taxes on their education assistance payments (EAPs), however their income will be likely low, they will pay little to no tax.
  • Your child (beneficiary) receives payments from their RESP once they have enrolled in a post secondary program.
  • Should your child decide not to pursue any post secondary education, you can transfer the savings to another child or withdraw your contributions tax free, certain conditions may apply.
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Important things to look before choosing a RESP provider:

 

  • Fees and Charges: Compare the fees associated with different RESP providers, including management fees, account maintenance charges, and any additional costs. Choose a provider with reasonable fees to ensure your savings grow efficiently over time.
  • Investment Options: Look for an RESP provider that offers a wide range of investment options, such as mutual funds, GICs, and stocks. This allows you to build a diversified portfolio suited to your risk tolerance and financial goals.
  • Government Grants and Contributions: Ensure the provider helps you maximize available government grants like the Canada Education Savings Grant (CESG). Check if they offer automatic enrollment for these grants and other government incentives.
  • Account Flexibility: Some providers offer more flexibility in terms of contribution schedules, withdrawal options, and investment changes. Consider your needs and choose a provider that allows adjustments as your financial situation evolves.
  • Customer Service and Support: Excellent customer service is essential when managing an RESP. Choose a provider known for responsive, knowledgeable support, whether it’s online, in person, or by phone.
  • Track Record and Reputation: Research the provider’s reputation and history in managing RESPs. Look for reviews and ratings that indicate strong performance and reliability.
  • Online Tools and Accessibility: Providers with easy-to-use online platforms make managing your RESP simpler. Look for user-friendly tools that allow you to track contributions, investments, and grants efficiently.

How to grow your RESP savings faster?

 

To grow your Registered Education Savings Plan (RESP) savings faster, start by maximizing your contributions to take full advantage of government grants and incentives. Regularly contribute to your RESP to benefit from compound interest over time. Investing in a diversified portfolio of stocks, bonds, and mutual funds within the RESP can enhance potential returns. Consider higher-risk investments with the potential for greater growth, especially if you have a long time horizon before your child starts post-secondary education.

Additionally, make use of the Canada Education Savings Grant (CESG) by contributing up to the annual limit to receive matching funds. Review and adjust your investment strategy periodically to ensure it aligns with your risk tolerance and financial goals. By taking these steps, you can significantly boost your RESP savings and better prepare for future education expenses.

 

 

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    • Advantages

    • Ease of use and attractive investment incentives. These plans
    • Provide a dual incentive for parents to save for their child’s education, as they are not required to pay taxes on the money initially and are eligible for bonus contributions from the government.

    Disadvantages

    • The grant money provided by the government must be returned if the child does not enroll in an approved post-secondary education program within 36 years of opening the account.
    • Any investment earnings that are withdrawn from the RESP and not used for educational expenses will be subject to income tax and a 20% penalty.

     

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