Registered Education Savings Plan (RESP) is a tax-deferred long-term investment plan helping parents to save money for their children’s post-secondary education. If you have no idea what a RESP is and how it works, we are here to help you.
What is a Registered Education Savings Plan (RESP) and How Does it Work?
In Canada, many children are aiming for their post-secondary education, making it a great way to push the boundaries of their thoughts. Not every family can afford to pay for post-secondary education. However, if they do, parents find themselves at the edge of savings. Here is where investing in a Registered Education Savings Plan (RESP) really makes sense!
With this long-term Canada education savings plan, you can contribute to your children’s post-secondary education. You may be qualified for Canada Learning Bond (CLB) and Canada Education Savings Grant (CESG) by investing in this savings plan. It will help you obtain a contribution from the Government.
While applying for RESP you need to keep in mind these three important factors:
- Parents are usually the subscribers here who are opening accounts in RESPs and contributing to them
- The recipient of the funds is your child whose name you have mentioned in the RESP
- The financial institutes in Canada are the providers who invest your money and eventually pay at the time of withdrawal
A subscriber can open an account on RESP and keep contributing to it regularly for a specific amount.
Applying for this Registered Education Savings Plan in Canada is quite simple. You need to provide the SIN number of your child who you want to get the benefits of this education plan.
Once your children graduate from high school and enrol at an educational institution for the post-secondary program, they will receive the amount from the provider, including the interest earned. It will help you finance their education.
Types of Registered Education Savings Plans
In Canada, there are three RESP plans available. You need to choose one based on your family structure and children’s educational needs. For example:
Individual plan
In Individual RESPs, you can mention the name of only one beneficiary. However, the beneficiary doesn’t have to be in any relation with you. For example, you can open it even for the son or daughter of your friend looking to continue their post-secondary education. Also, any adult can apply for an RESP account for another adult or themselves.
Group plan
Group RESP plans, also considered group scholarships, allow contributions from different families. In this case, you need to invest in low-risk products. Once they get enrolled, the provider (your preferred financial institution) will distribute the annual payments among the beneficiaries for the post-secondary education years. However, it offers higher fees than other RESP types.
Family plan
Do you have more than one child? If so, this family RESP plan is best as it allows you to designate the names of more than one beneficiary. In this case, the beneficiary should be in relation with you, such as children, siblings, grandchildren or stepchildren.
You can choose a suitable plan for RESP and contribute to the account as much as you can every year. However, maybe not yearly, there’s a lifetime contribution limit of up to $50,000 for a qualifying RESP beneficiary. Even when it’s a tax-free investment, as mentioned, the subscriber may have to pay a 1% tax for the additional contributions every month until they withdraw the excess amount.
Get Started for Canada Registered Education Savings Plan with einsured.ca
At einsured.ca, we can help you open an RESP account while guiding you with the most suitable plan to pay for your child’s post-secondary education program. Our professionals are ready to assist you with the best advice!
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