Education costs have been rising steadily and most of us need to save for decades to actually be able to sponsor our kids for a good education.
Introduced in the year 1998, the Registered Education Savings Plan has helped many families plan their kids future with ease. The many plans, ways to tailor them and the government education grants have made them a secure way for parents to save for their children’s future. Like with any plan, there are a few tips to make the most out of your RESP. Here are our top 5!
5 RESP tips every parent should know to get the most!
Canadian Learning Bond
Who would say no to some extra income for your savings? With the Canadian Learning Bond, you can get the government to sponsor a good $2000 (CAD) if you come from a low-income family. This plan does not require you to make any contributions and can be used only after high-school.
Flexibility is key
The future is unpredictable and so are kids! With the wide array of non-collegiate opportunities available, it is not unheard of for kids to go the other way. So, if one of your children doesn’t want to pursue higher education, you can simply transfer the amount to your other child by keeping your plans flexible!
Get your tax benefits!
A small amount of planning can go a long way in making your educational payments pretty much tax-free! Withdrawals from contributed amounts are non-taxable and hence structuring them while leaving the grants and interest amount in your RESP can help you remain tax-free.
Another way to keep your tax payments at bay is by reaching the full limit of $50,000 (CAD). It helps you compound your investment effectively and the more you save, the more freedom your child will have when it comes to their education.
It’s literally all or nothing!
RESPs are designed to sponsor your children’s education. Once that is completed, the grant money remaining in the account is withdrawn by the government. It is crucial to withdraw this at least by the end of the educational year to allow you to make use of all the money. You can even choose to transfer it to your second child.
Convert it to an RRSP
An RESP can be kept open for 36 years. If the person under whose name it was created is under the age of 71, they can convert the same to an RRSP and benefit during retirement. This is to help make sure the money is utilized fully and everyone is comfortable.