A Registered Education Savings Plan (RESP)is a great way of preparing for your child’s future. There are several tax incentives as well as ways of getting funds from the government to kickstart your savings. Here is everything you need to know about an RESP.
How Do I Open an RESP?
To open a Registered Education Savings Plan, you first need to find a provider. There are many Canadian banks and institutions that offer these savings plans. Some charge more fees than others, while some have limits on how much you can place in the account or penalties. There are also different kinds of RESPs; some people use a traditional savings account while others invest your funds in mutual funds or the stock market. Talk to your prospective providers before opening an account so you can make the right choice for you and your situation.
In order to open a Registered Education Savings Plan, you will need to have a Social Insurance Number (SIN) for both yourself and the beneficiary of the account. The most you can put in an RESP is $50,000 for each beneficiary.
Benefits of an RESP
There are several benefits to opening an RESP. First, the Canadian government has several programs that will contribute money to the plan to help get your educational savings off to a good start. These include the Canada Learning Bond, the Basic and Additional Canada Education Savings Grant, and provincial programs such as the Alberta Centennial Education Savings Plan. Altogether, these programs may contribute more than $10,000 to your child’s future educational costs.
In addition, a Registered Education Savings Plan is tax-deferred. This means that you don’t pay taxes on money placed in one of these accounts. This increases the amount that you can afford to save for the future.
Are There Any Disadvantages?
The main disadvantage of an RESP is that the money can only be used for post-secondary educational expenses such as tuition and materials. The money cannot be removed and used for another purpose if an emergency occurs. However, this is a mixed blessing in many ways because it ensures that your child will still have a college fund if your family hits hard financial times.
An RESP is one important part of preparing for your child’s future. With education becoming both more expensive and more essential to a successful career, preparing for these expenses is an important part of being a responsible parent