What You Need to Know about Registered Education Savings Plans (RESPs) in Canada
Registered Education Savings Plan or RESP is a type of savings plan intended for families that hope to save for the education of their children after high school. But while majority of RESPs in this country are primarily for children, there also are those that can be opened for an adult. The one who opens the plan will then be called the “subscriber.”
As soon as your kids enroll in post-secondary education, they automatically become entitled to payments courtesy of their RESP; to be more specific, they will take EAPs or educational assistance payments. By definition, EAPs are comprised of investment earnings as well as grant money from the government. The individual who is set to receive an EAP, like your child, will be called or referred to as the beneficiary.
So, if you reside in Canada and would like to avail RESP, here are some of the most important things you ought to know about this program; and mind you, there are a lot of things you first must understand before even considering it.
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1 – One of the first things you must know about your savings in RESP is that they’ll grow tax free. In simpler terms, it means that as long as your investment earning stay within the plan, they never will be subjected to tax.
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2 – Next, know that if you save for your kid who’s 17 years old or younger, it means that the government is obliged to put money into the RESP, which in turn is classified later on as a grant or bond.
3 – Furthermore, you have the right to put money whenever you want and the usual lifetime maximum is usually around $50,000 per kid. But you should be aware as well that some plans will require you to set and schedule monthly or annual contributions.
4 – It also is interesting to know that contributions aren’t also considered as tax deductible. On the other hand, you actually can withdraw them tax free and away from the plans.
5 – There is no denying that you’re quite new to this type of educational plan, but the good news is that there really are more than a handful of investment options made available for those hoping to get RESPs, including bonds, mutual funds, GICs, and stocks.
In the end, you simply must understand and recognize the fact that with the sheer number of available plans out there, it means you can pick something that should be flexible enough for you to weigh on your options and figure out which of them have a good potential of converting your savings investment into success.