Planning For Your Child's Education
With the increasing costs of post-secondary education, it's smart to start putting money aside for your child's education early. Here are some helpful tips.
Registered Education Savings Plan (RESP)*
- Registered Education Savings Plans (RESPs) are registered through the Federal Government to help people save for their children's education.
- By putting money away each year, you can ensure that your child will have money available for post-secondary education.
- A family plan allows more flexibility when making withdrawals since the funds in the plan do not have to be shared equally among the beneficiaries. Plus, if one of your children doesn’t go to post-secondary school, the money goes to the other beneficiaries.
- Anyone can contribute to an RESP, not just the parents of the child. You can even open an RESP for yourself but you won’t get the Canada Education Savings Grant (CESG).
- Interest earned on an RESP is tax-free, and when your child starts using the money for school only the accumulated interest is taxable as income.
- If you choose to open an RESP, you can take advantage of the CESG.
- This type of investment guarantees you a set return on your money over a fixed period of time, which can be very beneficial when saving for a specific date in the future.
- There are short and long-term deposits. Short-term deposits usually require a higher investment than long-term deposits, and often have a slightly lower rate of return. Term deposits pay out interest monthly on any term longer than 90 days.
Contribute to a Registered Education Savings Plan to take advantage of the 20% additional grant provided through the Canada Education Savings Grant.
- This type of investment is a bit more complicated than a term deposit. The potential exists to make more money; however, a return is never guaranteed. Even with a mutual fund that invests in guaranteed government bonds there is an element of risk.
- There are usually fees involved in purchasing or selling funds, and there are often management fees involved.
What is the CESG?
- The biggest incentive to buy RESPs is the Canada Education Savings Grant (CESG).
- RESP investors receive an additional grant of 20% from the government on the first $2,500 of an annual investment.
- RESP investors may also be eligible for the Canada Learning Bond and British Columbians with children born in 2007 or later may be eligible for the BC Training and Education Savings Grant, a onetime $1200 grant from the Government of British Columbia.
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