The days are long but the years are short, and those tuition payments will come sooner than you think. The good news is there are ways to save now so when you get the bill you don't have to panic.
Registered Education Savings Plans (RESPs) are an ideal way for parents or grandparents to build post-secondary education savings for their children, grandchildren or loved ones.
RESPs provide three main financial benefits:
- Government money is added to the subscriber’s personal contributions.
- Tax-sheltered growth of both the personal and government money in the plan.
- Funds withdrawn are taxed at a lower rate, as they are allocated to a student in a much lower tax bracket.
How are RESPs set up?
The subscriber, who are usually the parents or grandparents, opens up the investment to save for the education of a beneficiary, who is usually their child or grandchild.The subscriber may then make contributions to the plan or invite anyone else to contribute. Contributions may be made for up to 30 years, and the plan may stay open for up to 35 years. If the beneficiary qualifies for the disability tax credit, these timelines are extended by 5 years.
A beneficiary must be a Canadian resident with a social insurance number (SIN) when the plan is opened. Any person may be a subscriber, but usually it’s the beneficiary’s parent.
There are two types of plans; an individual plan with one beneficiary, or a family plan where the beneficiaries are related siblings or cousins. There’s no minimum or maximum beneficiary age to open an individual plan, you can even set one up for yourself.
What’s the maximum allowable contribution?
For personal contributions, there is no maximum annual contribution limit, as long as the lifetime contribution doesn’t exceed $50,000 per beneficiary.
Whether you’re looking to save for your child’s, grandchild’s or loved one’s post-secondary education starting to invest early is important, book an appointment with an expert Advisor today.
