RESP: A Futureproof Plan For Your Child’s Education

RESP

Parents in Canada want their children to be highly educated. They want them to have the best education there is, which is why the country’s literacy rate is around 99%. However, in recent years, education cost has steadily been on the rise, and for parents, that’s becoming an extra burden. Not to worry, Parents can start saving as soon as the child is born, and Govt also helps by contributing as Grants. This policy is known as RESP or Registered Education Savings Plan, and it’s a government initiative for parents to invest in their child’s future post-secondary education. Wondering what the advantage of this policy is? In RESP, the contributions made are After-tax Money, and there’s a 20% return(as Grants) on investments thanks to CESG, which Grows tax-sheltered. Sounds great. Well, read on to find out more.

More about RESP

A child’s parents or guardians generally open an RESP account; it can be grandparents as well. All you need is the SIN number of the Parents and the beneficiary’s social security number. You can open an RESP account in almost all the Financial Institutions of Canada, such as Banks, Insurance Companies, Mutual Fund Companies; once you open, you can contribute to a lifetime maximum of $50,000, which applies to all the accounts you open. If you contribute over the limit in a month, you would be getting tax at 1%, so it’s advisable to stay under the limit. Another advantage of an RESP account is that you can invest in stocks, bonds, exchange-traded funds, mutual funds, and much more with this scheme. There are different types of RESP accounts that you can invest in. Have a look at the list below:

The different types of RESP

When it comes to classifying RESP accounts, there are three types of RESP accounts that you can look into.

  • Individual Plans: This plan is ideal if you’re only trying to manage your own child’s education and no one else’s
  • Family Plans:  This plan allows multiple beneficiaries, and the only obligation is that they all should be related by blood.
  • Group Plans: Group RESPs are another option available to parents and guardians that may be appealing as the money is pooled with other people and managed by a plan dealer.

You can opt for any one of these plans for your child’s education.

How does it work, and what can it be used for?

RESP account can be used to fund your child’s higher studies, such as:

  • Apprenticeship programs
  • Colleges
  • Universities
  • Trade schools

You can contribute a maximum of $2,500 an accounting year, and an Extra 20% of the amount would also be deposited to the account through the CESG. If you save up more than that, you might not get the Grant on that portion. You can find out more about RESP by getting in touch with the team at Canadian LIC; they can share all the details you’re looking for.