With the ever-rising costs of a college education, saving for your child’s tertiary education is fast becoming a fact of life. Educations is the best investment or gift a parent, guardian, grandparents could ever give a child.
Attending post-secondary education can make a big difference to earning potential and standard of living. But with education costs continuing to rise, it is more important now than ever to start saving early. Thankfully, there are a number of investment vehicles to help you offset some of those expenses – but with the array of choices, choosing the right one can be an education in itself. Knowing the options before you decide where to invest your money can help you make the most of your child’s college years.
Attending post-secondary education can make a big difference to earning potential and standard of living. But with education costs continuing to rise, it is more important now than ever to start saving early. Thankfully, there are a number of investment vehicles to help you offset some of those expenses – but with the array of choices, choosing the right one can be an education in itself. Knowing the options before you decide where to invest your money can help you make the most of your child’s college years. Saving for a child’s post-secondary education may be easier than you think. The key is to start early and make it automatic using a Registered Education Saving Plan (RESP).
An RESP is a tax-deferred savings account designed for Canadians to save for qualified post-secondary education expenses for eligible students. Although contributions are not tax-deductible, money inside the plan can grow tax-free until it’s withdrawn. In addition, the government offers several grants to help you build your education savings.
RESPs are not just for kids, could be used by older adults as well. The only difference is that adults over 18 years are not entitled to the grants, but has the same compounding tax- deferred advantage just as RRSPs. It also provides an income splitting opportunity.
RESPs have the following features:
• Contributions – A lifetime maximum of $50,000. The contributions are not tax-deductible and can only contribute to a family plan prior to the beneficiary turning 31. For an individual RESP, a client can contribute for up to 31 years after the plan is entered into.
• Government assistance – The federal government offers the Canada Education Saving Grant of 20% (up to $500) on the first $2,500 invested in a RESP per beneficiary each year. The lifetime maximum is $7,200 per beneficiary. Depending on the net family income, additional 10 – 20% on every dollar of the first $500 could be received.
• Transfer – Up to $50,000 of eligible RESP income can be transferred to an RRSP or a spousal RRSP, if not used by the beneficiary.
