Why You Need A Registered Education Savings Plan
Paying for the college education of a child can be a formidable task, and parents often have to seek out assistance programs which can help pay for the rising costs of such an education. RESPs or Registered Education Savings Plans are one option, and they can be very effective for preparing families for the eventuality of college costs. With the help of such a program, a child’s further education can be assured, regardless of what the future may bring.
Its benefits with regard to helping college students pay for college is enough incentive for most people, but there are other reasons to sign up for a Registered Education Savings Plans in Canada besides. Such a program also opens up a number of investment opportunities in the form of stocks or bonds, and beneficiaries may be eligible for additional grants or funding from the government besides.
Contributions made to an RESP are also tax deferrable. As long as the funds remain in the account of the beneficiary, they will remain free of tax. Even when the beneficiary later enrolls in college and starts to receive payments from the plan, the taxes he will be liable for will usually be for the minimum rate or even none at all.
One of the keys to gaining the most benefit from an RESP is being aware of the different options available. A reputable RESP advisor in Canada should be able to provide you with more details, but one of the most useful benefits you can avail of is the Canada Education Savings Grant (CESG) offered by the Canadian government to eligible beneficiaries. This grant is offered to beneficiaries younger than 18, and it amounts to 20% of the yearly contributions made by the subscriber. It is limited to $500 for every year until the beneficiary turns 18, with a lifetime maximum total of $7,200. Other assistance programs are offered within the RESP, so make sure to ask your RESP advisor about them.