RESPs: A Uniquely Canadian Way to Save for Education
Our country has a strong tradition of empowering Canadians by providing access to education — from instituting free and compulsory public schooling in 1871, to the creation of a flourishing post-secondary system that today includes almost 100 universities and approximately 130 publicly funded colleges and institutes. In fact, Canada is regarded as one of the most educated countries by the Organisation for Economic Co-operation and Development (OECD), ranking 1st worldwide in the number of adults having post-secondary education.
In response to rising costs of post-secondary education, a unique program was introduced in 1972 called the Registered Education Savings Plan (RESP). Since its inception, RESPs were designed to encourage Canadians to save for post-secondary education by providing tax-sheltered growth on money earmarked for a child’s future education. In 1998, the Canada Education Savings Program (CESG) was introduced followed by other government education grants which offer additional incentives to save within an RESP. Over the years, the lifetime contribution to an RESP has grown to $50,000 per child.
The RESP offers Canadians an incentive unlike any other in the world. Tax advantages and government grants are available to encourage saving for education — and yet only half of eligible children are accessing the benefits. At Knowledge First Financial, we know that RESPs make a huge difference to students. Not only does an RESP ease the financial burden, it empowers students to focus on their studies to unlock the potential that education can bring.
The Benefits of RESPs
Saving for your child’s education now and putting aside a little money each year helps to ensure they have access to funds to attend a post-secondary program when the time comes. Here are the benefits of opening an RESP when your child is young to assist with education savings:
- Compound growth: As soon as your child is born, you can start saving for their education using RESPs – up to $50,000 for each child. You can contribute regularly, at a rate that fits within your budget, and you’ll have access to the funds when it’s time for your child to attend college or university.
- Tax savings: When it comes time to withdraw funds to pay for your child’s post-secondary education, the government contributions and earnings are taxed in the child’s name, and since the child is a student, there will be little or no tax to pay.
- Tax-deferred growth: All investment income generated from an RESP plan is tax protected as long as the funds remain in the plan.
- Access to Canada Learning Bonds (if you qualify): Those qualifying for the National Child Benefit Supplement can qualify for a Canada Learning Bond, providing your child with a $500 initial grant into an RESP, and $100 per year until age 15, for a total of $2,000 lifetime per child.
- The Government makes contributions: Through the Canada Education Savings Grant (CESG), the federal government will add 20% to your annual RESP contributions (up to a maximum of $500 per child, per year). There is a $7,200 lifetime limit per child.
- Provincial incentives: There are a number of provincial education savings programs that provide incentives to open an RESP for your child, notably if you reside in Quebec, Saskatchewan, and British Columbia.
Remember, by contributing early in your child’s life you’ll receive government grants sooner and your savings will have more time to grow. Although starting early will help you save more in the end, saving something is the most important thing of all.
The Future Is Brighter for Canadians with an RESP
The RESP offers Canadians an incentive unlike any other in the world. Tax advantages and government incentives are available to encourage saving for education — and yet only half of eligible children are accessing the benefits. At Knowledge First Financial, we know that RESPs make a huge difference to students. Not only does an RESP ease the financial burden, it empowers students to focus on their studies to unlock the potential that education can bring.
Mark Canada’s 150th Year by Building Your Child’s Path to Success
With 150 prizes, at a total value of $45,000, to be won – including five $5,000 Travel Gift Card grand prizes – now is the perfect time to open an RESP with Knowledge First Financial.
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