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​The Benefits of RESPs

Planning for your children’s future? Get a head start with a Registered Education Savings Plan (RESP). RESP’s are designed to help you plan early and invest in your child’s education tax-free.

Here are just some of the ways setting up an RESP account when your child is young can benefit you and your family:

The government also contributes

Trying to save for your child’s post-secondary education can be daunting, especially as tuition rates in Canada continue to rise. When you open a RESP, you are immediately given a boost on your investment through the Canada Education Savings Grant. This federal government program will automatically contribute a grant of 20% — which is an extra $500 on your maximum contribution of $2,500 per year. Lower-income households are given an additional grant through the Canada Learning Bond, which contributes up to $2,000 per eligible child.

Your savings are tax-free

RESP is considered a tax-advance account, which allows Canadians to receive tax breaks while saving for higher education. RESP savings allows for tax-free growth of your investment earning for however long you decide to stay within the savings plan, allowing your savings to grow faster. However, an RESP becomes taxable once the money is withdrawn and used. Once your child enrolls in a post-secondary institution, the money accrued from the RESP will be processed through educational assistance payments (EAP). This program allows the RESP to be shifted from the contributor to the beneficiary. Taxes will then be based on the student’s income, rather than the parents’, which can result in them paying very little if nothing at all.

It offers flexibility

You can choose a variety of investment options in an RESP depending on your risk level, including mutual funds and GICs. RESP accounts can remain open for up to 36 years, should your child choose to delay their post-secondary education. Family plans also allow contributors to designate several children as beneficiaries and the ability to reallocate funds to another account like an RRSP (Registered Retirement Savings Plan). It is important to note that should your RESP be withdrawn to another account, it will be considered taxable and may face additional penalties.

A Registered Education Savings Plan is a practical way to contribute to your child’s education and positively impact their financial future. At Moya Financial, our RESP accounts are designed to maximize your savings and help you achieve your financial goals. To learn more about starting an RESP, contact us today!

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