What is an RESP?
An RESP is a very advantageous way to save money with a view to funding your children’s post-secondary education. The money that accumulates in an RESP can be used to cover tuition fees and all the other financial outlays that come with higher education, such as lodging, school supplies, food, and transportation.
Who can open an RESP?
Parents, grandparents, godparents, uncles, aunts, and friends… anyone can open an RESP for a child, and a child can be the beneficiary of multiple RESPs. If a number of you are contributing money for a single child, you’ll need to make sure you stay within the governmental contribution limits to avoid any tax penalties, since the maximum contributions are determined per child.
Who can be named as the beneficiary of an RESP?
You can designate any child you wish and you don’t have to be related to that child.
You also have the option to change beneficiaries once the plan is in force. Contributions can then continue to be made up to the end of the plan term determined according to the age of the new beneficiary.
How much money can you save?
The maximum lifetime contribution is set at $50,000 per child and there are no annual contribution limits. This means you can tailor your contributions as your budget allows, provided you stay within the lifetime maximum permitted per child.
How to use generous government grants to boost your savings?
The federal government has created the Canada Education Savings Grant (CESG) to encourage parents to invest as early as possible in their children’s post-secondary education.
The CESG at a glance
- Annual grant: 20% of annual contributions
- Annual limit: $500
- Lifetime maximum per child: $7,200
Some provinces offer their own grant programs in addition to the CESG.
The federal and provincial grants are paid directly into the RESP and grow along with your own contributions. These little extras can provide a big boost to your savings.
What happens if the child doesn’t go on to pursue post-secondary education?
If your child decides not to pursue post-secondary studies, you may:
- Designate a new beneficiary
- Withdraw the money
- Transfer the money into your RRSP
- Make a donation to an educational institution
When it comes down to it, however, only you can decide what’s best to protect your home, family, and loved ones, and which type of insurance plan is right for you. For any question regarding insurance, investment, for a no-obligation insurance quote, consultation & second opinion. Please feel free to reach out!
Swinder Jodhka
416-825-3091
Broker, SSJ Financial Services
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