Why this message to you today?
The annual Registered Education Savings Plan (RESP) deadline is December 31st. If you have children, a RESP is a great opportunity to start saving for their future education and take advantage of some of the Government Grants and Bonds that might be available to you. The future cost of a university education could be between $60,000 and $100,000 or more. By investing in a RESP over the first 17 years of your child’s life, and gaining maximum benefit from the Canada Education Savings Grants, your future RESP value could cover most or all these costs.
What is a Registered Education Savings Plan (RESP)?
A RESP is a tax-sheltered account that allows Canadians to save for their children’s or grandchildren’s future educational expenses. Investments into this account will grow tax-free and may also qualify for government contributions, such as the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB)
What is the CESG?
The government provides a matching grant of 20% of whatever is contributed up to a maximum of $500 per year. This means if you contribute $2,500, the government will contribute another $500 to your RESP, up to a lifetime maximum CESG grant of $7,200. In addition, lower-income families may also qualify for an additional $50 to $100 depending on their net family income.
What is the CLB?
The government provides up to $2,000 to help low-income families. It provides an initial $500 contribution to the child’s RESP for the first year the child is eligible plus $100 for each additional year the child remains eligible.
Which RESP Plan is Right for You?
A RESP may be set up as an Individual or Family Plan. If you only have a single child, are looking to open an account for someone who isn’t related to you, are looking to save for your own future education, and/or are over the age of 21, then the individual plan would be the right fit for you. If you have more than one child or are planning to have more children in the future, the family plan would be the most beneficial choice. Beneficiaries must be related by blood or adoption to the plan subscriber and beneficiaries can be added or removed from the plan. Each beneficiary must use a portion of the funds accumulated in the plan; however, the funds do not need to be allocated evenly among each beneficiary.
The Bottom line:
Each year the cost of education is increasing and becoming more and more expensive. Saving early will allow you to take advantage of the available government incentives and allow more time for your investments to grow. This could help provide you with greater peace of mind knowing that your children’s future educational needs would be taken care of and allow your children to avoid going into debt by taking on student loans. By taking full advantage of the power of time and investing $2,500 annually per child over the first 17 years of their life, you provide your child with the gift of a lifetime that could truly change their life.
