RESPs (Registered Education Savings Plans) are a great tool to help families save for their child’s education. With the escalating costs of post-secondary education, starting a RESP account for your children as soon will definitely help offset these expenses. The HUGE advantage of starting such an account is the Education Savings Grant money which the government will match to your contributions to such a plan. (which can be up to $500 per child).
Did You Know…
- Government funding to universities is dropping. In the 1998-99 school year, government contributions made up just 55% of total university revenue, down from 74% in 1981-1982.
- Post secondary institutions are making up this funding shortfall by raising student fees. Since 1990, average tuition costs have more than doubled from about $1,500 to $3,800 in 2000.
- According to the 1996 Census, Canadians with just a high school diploma earned an average of $22,846. Students who graduated with a university degree earned almost twice as much with earnings of $42,054.
RESP Facts…
- The life time maximum that can be invested per child is $50,000. There is no annual limit up to this amount.
- The maximum grant money that is available per child, per year is $500. The government matches 20% of your contribution to a maximum of $500. So for example, a $2,500 contribution would entitle you to receive $500 of grant money. In some cases if you are late in beginning a RESP plan for your child, you could get up to $1000 in grant money by taking advantage of carry forward room which would accumulate from year 1998. (Call me to find out more!)
- Additional grants are available to lower income families who are looking to establish a RESP account for their child/children. To determine if you are eligible to receive an additional 10-20% grants (over and beyond the basic 20% government grant) please click here.
- The CLB (Canada Learning Bond) is an additional grant issued by the government to modest income families...It provides an upfront $500 payment per child (with a lifetime maximum amount of $2,000). To determine if you qualify for the CLB payment, please click here.
- Your contributions to the plan are not tax-deductible but the interest, dividends and capital gains compound and grow tax-free in the plan until money is withdrawn.
- When money is taken out from a RESP to pay for educational costs (i.e. Tuition, books, parking, etc.) the grant money and growth on the investments is taxed in the hands of the child/beneficiary. The initial principal invested (typically by the parents) is returned to the parents tax-free.
- ‘Family RESPs’ allow you to have one plan for 2 or more children. The advantage of doing this is that if one child decides not to pursue a post secondary education, the other child could use ALL the money inside the RESP plan for their own use.
- If none of the children go to post secondary education, then the person who made the initial RESP contribution would get back their principal tax-free. The growth/earnings on the investments can be taken in cash, with certain conditions, or transferred tax-free into their RRSP, if they have available contribution room. The grant monies received over the years is paid back to the government.
- HRDC will only pay grant money up to the calendar year of the beneficiaries 17th birthday. For beneficiaries aged 16 and 17, the grant will only be paid if :
- There have been contributions to the RESP of at least $100 per year in any 4 years
- Before the calendar year the beneficiary turns 16, previous contributions totalled at least $2,000.
- RESP monies can be used for ANY recognized institution within Canada, and outside of Canada as determined by HRDC. Click here to link to ALL eligible schools for which RESP money can be used for as determined by HRDC
What is a RESP?
 |
 |
 |
 |
 |
 |
 |
 |
 |