Post-secondary education costs could be an important factor in your family’s overall financial picture. Whether you’re planning for your children or grandchildren’s future, we can help you determine the education savings strategies that make the most sense for you.
A Registered Education Savings Plan (RESP) is a flexible way to enjoy tax advantages and the growth potential you need to meet for future post-secondary institution costs. Parents, grandparents (and friends*) can contribute money into an RESP account that will shelter the money on a tax-deferred basis until the child withdraws the money when attending a post-secondary education. The investment income and government grants will be taxed in their hands. As your child is unlikely to have significant taxable income, they may pay little or no tax on this money.
We can help you evaluate the different aspects of an RESP that includes:
- A lifetime maximum contribution amount for each child of $50,000. (There is no minimum or maximum annual contribution to an RESP).
- The ability to potentially transfer the money in an RESP to a plan for another child or to the contributor’s RRSP (under certain conditions). You can also transfer it to your family RESP, should the child pursue another career path
- Access to the Canada Education Savings Grant (CESG) for parents contributing to an RESP. Over time, CESG can provide up to an additional $7200 in extra investment capital.
- Basic CESG gives you a 20% grant of the first $2,500, contributed each year. That’s like $500 in “free” money each year. Unused Basic CESG room can accumulate and carry forward, so you can make up for missed opportunities by making contributions in later years. The maximum Basic CESG you can collect in a year is $1,000 (i.e. 20% of $5,000 of contributions).
- Additional CESG offers an additional grant (above the Basic CESG) of up to 20% on the first $500 you contribute to an RESP based on your family income.
Depending on where in Canada the RESP beneficiary resides, the RESP may be eligible for additional provincial grants.
*Some restrictions apply