With the summer coming to an end and kids heading back to school, I thought it may be a good time to highlight the RESP for parents and grandparents.
The RESP (Registered Education Savings Plan) is one of the best ways to save for your children’s (or grandchildren’s) education. However, it still remains one of the most confusing investment accounts. The RESP comes with a number of rules and limits, but used properly, can help your
child during those years after high school.
Oh a high level, here are seven highlights of the RESP that describe the plan best:
1. If you contribute to an RESP, the government will match 20% of your contributions up to $500 per year. Therefore, if you contribute $2,500 the government will match 20% or $500. You can contribute less than $2,500 per year with a 20% match. This match is called the “Grant.”
2. Your savings grow tax free. There is no tax on the investment earnings, as long as they stay in the plan.
3. Further to the “Grant” depending on family income, the government may also contribute the “Bond.” Read More About the Bond:
4. You can usually put money in whenever you want, up to a lifetime maximum of $50,000 per child. The lifetime maximum for the “Grant” is $7,200 per child.
5. The contributions are not tax deductible. But you can withdraw them tax free from the plan at any time for any reason.
6. There is a wide range of investment options available for RESPs. Examples: Mutual Funds, GIC’s, Stocks and Bonds. Some plans let you decide how to invest your savings. Others invest your money for you.
7. Your child can take money out of the RESP when they enrol in university or college or another qualifying education program or specified education program.
Yes, the RESP has some rules and limits, however being an expert in the RESP is something I pride myself on. If you have any questions or would like to set up a meeting to review, establish your RESP, please call or email my office.
All the best,
Mike Jodouin
