Registered Education Savings Plan
An RESP is an easy way to help set your child up for future education and success by preparing financially for post-secondary education.
What is an RESP?
An RESP, or Registered Education Savings Plan, is a tax-deferred, government-assisted, flexible, investment plan to help save up money for post-secondary education for your child This plan can be opened at any time throughout a child’s life until he or she reaches the age of 14-years-old. It can continue to grow until the child turns 18 years of age. You can contribute to the fund all at once or over a period of time, contributing up to $50,000. Once the plan is opened, anyone such as uncles, aunts, godparents, and grandparents, can contribute. You can get a tax benefit for contributing.
Why Contribute?
When you contribute to an RESP, you will see there are tax benefits for all contributors. All interest payments, capital gains earned in the RESP, as well as dividends, are not taxable. When the value withdrawn from insurance exceeds the amount contributed, that is when it will be taxed.
Accessing the RESP
When the child is ready to use the RESP, which would be when the child wants to pursue post-secondary education, he or she will need proof of acceptance from a post-secondary institution. During the years of contributing, if the plan received government grants, those will already have been put into the plan.
Once the student takes out money from the RESP, the interest will be taxed. The money can be returned to the financial institution if the student decides not to go for post-secondary education. As well, contributors can get their money back and grants would not be redeemed and returned to the government. But If the child postpones it, RESP money can be saved until the child turns 35.
Don’t worry if your child wants to wait a while after high school before taking advantage of the RESP. An RESP plan can be kept open until the child turns 35, although you should check with your own RESP to confirm the length of time you have agreed on.
EAPs, What are They?
An EAP, or Educational Assistance Payments, comes from the RESP. They are a combination of grant money and investment earnings. Once the child is enrolled in post-secondary education, the child can start receiving these payments. The student is the one who will pay the taxes on the EAPs, but either the child or parent can withdraw money.
An RESP gives family and friends time to grow the plan to give the child a financially stable education.
5 RESP tips every parent should know to get the most!
- Subscribe to the Canadian Learning Bond for some extra income!
- Keep your plan flexible and easy to modify
- Toe the line with the maximum contribution limit and get tax benefits
- Take out the money before their education ends
- Carry forward the money if it is not used
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.
Get in touch with experts at Canadian LIC to know more about RESPs and how you can benefit!
Our team understands that having a child and saving for their future is a huge responsibility. Investing in your child’s education early is a wise move. You can rely on us to help you invest in an RESP plan. This plan is flexible and tax deferred. It provides you assistance to ease and manage your child’s higher education
When you open an RESP account you will get grants from the federal and provincial governments, this will help you pay for over 40% of your child’s fees when he or she is 18 years old. Please note that when your child withdraws the money for educational purposes this amount will be taxed on any interest that has accumulated on the investment.
Benefits of opening an RESP account:
- The amount saved in the RESP account is not taxable
- A RESP account can stay open for up to 36 years
- Your child is free to take money and enroll in any college or education program of their choice.
There is a wide range of investment options available for RESP’s, this includes stocks, bonds, mutual funds, GICs
As a parent or guardian, you can open a RESP account for your child when they are young. You can open the RESP at any time until your child is 18 years old. This account can be opened by anyone, including grandparents and guardians. For more information about RESP account and how it can beneficial for your child, call us now.
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Call 1 844-542-4678 to speak to our advisors.
Helping you provide better education to your children
What are the government grants available for an RESP?
The Canada Education Savings Grant (CESG) is a grant from the Government of Canada that is paid directly into the child’s Registered Education Savings Plan (RESP). In this grant the government adds 20% to the first $2,500 that is made into a RESP on behalf of an eligible beneficiary each year. For more information, speak to a member of our team now. We are here to help you with all your requirements.
CLB Canada Learning Bond
This grant is offered to assist low-income families. Here $500 deposited at plan opening by the government whether or not the parent makes contributions. Also an additional $100 deposited every year until the beneficiary’s 15th birthday.
QESI Quebec Education Savings Incentive
Every child in Quebec is entitled to the basic 10% QESI. Here the grant money is deposited directly into your child’s RESP account. It has an annual limit of $250 per child. QESI is offered to modest and middle income families. The Grant money is deposited directly into your child’s RESP account.
Eligibility for the Canada Education Savings Grant
- In order to be eligible for the grant, parents or grandparents must contribute to a child’s RESP prior to the end of the calendar year in which the child turns 15 years
- The child must be a Canadian resident
- It is important the child must have a valid Social Insurance Number
- There must be a RESP account in the child’s name
- It is important that you request the government for the matching contributions
The Government of Canada helps and contributes towards your effort to save. It deposits substantial grants directly into your RESP.
Invest in RESP to provide quality education to your child
Get a social insurance number for your child
A social insurance number is essential to open an RESP account. This number can be used by your child later in life when he/ she applies for a job, credit card and more.
Select the right RESP
It is essential that you choose the right type of RESP. You can open an RESP at a bank, a credit union, a mutual fund company or by an investment dealer. You can discuss your requirements with your agents and they will suggest a suitable plan for you.
Learn about the different types of RESPs
A social insurance number is essential to open an RESP account. This number can be used by your child later in life when he/ she applies for a job, credit card and more.
Select the right RESP
- Weigh the pros and cons of each type of RESP
- Learn about the different types of RESPs
It is essential that you choose the right type of RESP. You can open an RESP at a bank, a credit union, a mutual fund company or by an investment dealer. You can discuss your requirements with your agents and they will suggest a suitable plan for you.
There are three types of RESPs individual, family and group. An individual plan can help you pay for the only child’s education. You can opt for a family or group plan if you have another child.
Before investing in an RESP, it is important that you weigh all the pros and cons. Please note that individual and family plans work for parents and guardians who want control over their investment. These plans provide you the flexibility to choose from a variety of investment options such as savings accounts, GICs, mutual funds, stocks, and more.
Please note that RESP account can be opened by parents, grandparents, other family members and friends. It can be opened by one person, or opened jointly by spouses or grandparents. You can name yourself or another adult as the beneficiary.
If you need more information about how to open a RESP account or would like to speak to a member of our team to book an appointment.
Get The Best Insurance Quote From Canadian L.I.C
Call 1 844-542-4678 to speak to our advisors.
The above information is only meant to be informative. It comes from Canadian LIC’s own opinions, which can change at any time. This material is not meant to be financial or legal advice, and it should not be interpreted as such. If someone decides to act on the information on this page, Canadian LIC is not responsible for what happens. Every attempt is made to provide accurate and up-to-date information on Canadian LIC. Some of the terms, conditions, limitations, exclusions, termination, and other parts of the policies mentioned above may not be included, which may be important to the policy choice. For full details, please refer to the actual policy documents. If there is any disagreement, the language in the actual policy documents will be used. All rights reserved.
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