Saving for your children’s education with RESPs

Post-secondary education in Canada is expensive. Many students have to take on substantial student loans to pay for their studies, and then struggle for years to repay them. You can make the future easier on your children by investing in a Registered Education Savings Plan (RESP).

You can open an RESP for your own children, children of relatives or even for children you are not related to. When the beneficiary enrols in a qualifying educational program after high school, he/she will receive payments from the RESP provider.

The savings in an RESP are tax-free, can be accessed for a period up to 36 years, and you may even be able to earn extra money by accessing government grants. The Canada Education Savings Grant matches 20 per cent of your RESP contributions each year until the end of the year when the child turns 17. On top of the basic 20 per cent, the Additional CESG matches 10 per cent or 20 per cent for the first $500 you contribute each year until the beneficiary turns 17. The additional percentage depends on your family income.

The child in question may also be eligible for the Canada Learning Bond if he/she was born after December 31, 2003, and if you get the National Child Benefit Supplement. The Canada Learning Bond is a program destined that gives you $500 to start the RESP and then $100 per year until the child reaches the age of 15.

Many financial institutions offer RESPs. You can find a list of providers on the Human Skills and Development Resources Canada website (http://www.hrsdc.gc.ca/eng/home.shtml). All you need is a valid SIN number for you and for the child who will be the beneficiary, and you will also need to show the child’s birth certificate or PR card. You should meet with several providers and discuss your investment options before you make a choice.

Even if your child decides not to continue education after high school, RESPs offer sufficient mobility to make good use of the savings in them. You can transfer the funds to a different RESP (for example, that of a sibling), to an RRSP, or you can withdraw your contribution and your investment earnings (the investment earnings are taxable).

As you can see, all it takes is to start, even with a modest contribution, and to start as early as possible. The government is ready to give you extra money to help you maximize your child’s chances for a better life. If you have small children, start now, because the money will accumulate over the years. When your children graduate from high school, you will congratulate yourself for giving them a debt-free future.

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