As parents, grandparents, or guardians, we all share a common dream: providing the best education and opportunities for our children. In Canada, one of the most powerful tools for realizing this dream is the Registered Education Savings Plan (RESP). Learn when to start one, the types of investments available, to how and when the funds can be withdrawn. We'll also explore the various grants that make RESPs even more attractive.
The best time to start an RESP is as early as possible. The sooner you begin saving, the more time your investments have to grow, thanks to the power of compound interest. Government grants are available until the beneficiary turns 16 contributions can continue until the beneficiary turns 31.
RESPs offer a range of investment options, we can help you to choose options that align with your risk tolerance and financial goals.
Funds in an RESP can be withdrawn for non-qualified and qualified education expenses, typically including tuition, textbooks, and living expenses. Qualified expenses may allow access to grants, while non-qualified withdrawals don’t, it’s an important distinction and we can help you decide what you’d like to do.
One of the most compelling reasons to open an RESP in Canada is the access to government grants, which can significantly boost your savings. Here are the key grants available:
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1. What is an RESP, and why is it important?
An RESP, or Registered Education Savings Plan, is a tax-advantaged savings plan designed to help Canadians save for their child's post-secondary education. It's important because it allows your savings to grow tax-free and provides access to government grants to boost your contributions.
2. Who can open an RESP?
Parents, grandparents, legal guardians, and other loved one can open an RESP for any
child. The child must be a Canadian resident with a valid Social Insurance Number (SIN).
3. When should I start contributing to an RESP?
It's advisable to open and start contributing to an RESP as your child is born to maximize the benefits of compound growth (for the full duration of saving) and government grants (available until age 16).
4. What types of RESPs are available?
There are 2 types of RESPs offered at First Credit Union: individual and family plans. The choice depends on your family's needs and goals, we can help you choose what’s best for you.
5. What happens if my child decides not to pursue post-secondary education?
You have several options:
6. How do I access government grants like the CESG, CLB and BCTESG?
To access government grants like the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB), you need to open an RESP account and make contributions. When you contribute $2500 per year, the CESG will add $500. The CESG is based on your contributions (20% up to $500 per year).
The CLB is available to low-income families without the need for contributions.
You can access the one-time $1,200 British Columbia Training and Education Savings Grant (BCTESG) when your child turns 6 up until the day before they turn 9.
7. What is the lifetime contribution limit for RESPs?
There is no annual contribution limit for RESPs, but there is a lifetime limit of $50,000 per child.
8. Can I invest the money in an RESP? RESPs offer a range of investment options, including savings accounts, term deposits, and mutual funds*.
Your choice of investments should align with your risk tolerance and time horizon.
9. Are there fees associated with our RESPs?
Yes, there may be fees associated with managing an RESP, such as administration fees, fund management fees, and trading fees if you choose to invest in mutual funds*.
10. Can I open multiple RESPs for one child?
Yes, multiple people can open RESPs for the same child, but it's important to coordinate contributions to ensure you stay within the contribution limits.
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*Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated.
This information was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.
Terms and conditions of government programs are subject to change at any time by the federal or applicable provincial government.