Invest in your child’s future with RESP
Putting a child through school is one of the biggest costs families can face. Post-secondary education can be the key to unlocking opportunities in life. However, as the cost of living has increased over time, so has educational expenses at post-secondary institutions. Financing these costs can be concerning for many parents to be able to afford to send their children to college or university.
A Registered Education savings Plan (RESP)
Registered Education savings Plan (RESP) is an excellent way to save for your child’s post-secondary education. You can contribute up to $50,000 per beneficiary that will grow tax free in an RESP until the savings are withdrawn for post-secondary education expenses. In addition, RESPs receives the Basic Canada Education Savings Grant (CESG) that will top up your annual contribution by 20% which goes up to a maximum of $500 each year for each beneficiary.
Grants and income are taxed in the hands of the beneficiary at the time of withdrawal and since students typically have a lower income, they pay little or no tax. A child may be eligible for the Additional CESG Grant depending on the family income to help increase education savings which include:
BASIC Canada Education Savings Grant (CESG)
- Matches 20% of the first $2,500 contribution each eligible year for each beneficiary
- Maximum per year is $500 (carrying-forward grant room can allow up to $1,000 per year)
- Maximum per beneficiary is $7,200 over the life of the plan
The additional amount of Canada Education Savings Grant (CESG) is money provided by the Government of Canada for Canadian children from low-income and middle-income families.
- An additional 10 or 20 per cent on the first $500 per year (over and above the Basic CESG)
- Maximum $100 per eligible year, but carry-forward of Additional CESG is not available
- Included in the CESG maximum per beneficiary of $7,200
- For Family Plans only, all beneficiaries must be siblings
Canada Learning Bond (CLB)
For beneficiaries born in 2004 or later, whose primary caregiver in receipt of the National Child Benefit Supplement
- $500 initial bond plus $100 per eligible year up to age 15 of the beneficiary
- No contribution required
BC Training and Education Savings Grant (BCTESG)
- To be eligible for the $1,200 the child was born in 2006 or later
- Child and custodial parent or legal guardian must be residents of BC
- The child is the beneficiary of a Registered Education Savings Plan (RESP) with a participating financial institution
- An application must be filed between the beneficiary’s 6th and 9th birthday
Type of RESP Plans:
Family RESP: A family RESP can have one or more beneficiaries, but each beneficiary must be related to the contributor. The beneficiaries must be under 21 when they’re named. Contributions can only be made until a beneficiary turns 21.
Individual RESP: Anyone can open an individual RESP and anyone can contribute to it. This includes parents, grandparents, aunts, uncles and friends. You can even contribute to an individual plan for yourself.
Group RESP: A group RESP pools the contributions of many investors. Contributions are made according to a schedule and are used to buy plan units. The date the plan matures is set at the time of enrollment and is based on the child’s birth date. When the plan matures, the beneficiary usually shares in the pooled earnings of investors with children the same age. If your child does not begin post-secondary studies at the same time as the rest of the group, the earnings you receive from the plan may be affected. And if you drop out of the plan before it matures, you forfeit all of your earnings to the group.