Saving For Education Using An RESP
Birthday, Baby Showers, Special Occasions through 2013…. if you are looking for a great gift to give a child, how about a Registered Education Savings Plan (RESP)? Although, this may not be the hottest toy or latest clothing line, it is a gift that no one can ever take away – the gift of education. Toys usually get broken, lost, forgotten and unused – parents, grandparents, aunts, uncle and friends should consider contributing into an RESP for a child as a gift; this would ease the financial stress on the child when it comes time to head off into university or college.
There are many advantages of having an RESP, such as: Tax Free Growth and the Government of Canada offering each beneficiary a grant of 20% up to $500 per year, per child. A person who is considering opening up and RESP for a child should take the time to understand the basics of an RESP such as:
- What is an RESP: through the federal government, a tax deferred education savings program offering financial assistance and potential tax advantages to help Canadian families invest in higher education.
- Understanding terminology: some people don’t understand the words that companies use when describing their product – this article will assist you in understanding the RESP terminology. As well, check out Heritage Education Funds Glossary for more terms that could be helpful in your research for RESP.
- Canada Education Savings Plan (CESG): most families don’t know that they can take advantage of the government grants, this short article will provide a brief explanation on what the government has to offer.
- What happens if the child does not go to school: providing different options on what a parent or a subscriber can do if the child chooses not to pursue post-secondary education.
This article was written by Jim Yih, a best selling author and financial speaker who specialized in financial education programs will talk a little about the above points to help you understand what a great benefit it is to have an RESP; Mr. Yih continued to talk about RESP and its limits, he states some of the important things a parent should take into consideration when putting money into an RESP such as:
- Knowing the RESP contibution limit – a subscriber should know the maximum lifetime contribution limit for each beneficiary is $50,000.
- Knowing the Canadian Eudcation Savings Grant (CESG) contribution limit – subscribers must understand that CESG contributions limits are different from RESP contribution limits, subscribers should know the total amount they may get from the government.
- Having more than 1 RESP for a beneficiary – a beneficiary may have more than one RESP plan under their name, but subscribers must understand that contributions can not exceed the lifetime limit.
- Age and time limits – you can open an RESP for a newborn.
- Penalty tax on over contributions – when an over contribution is done on an RESP, subscribers are subject to penalty tax.
- Transferring RESPs – under the Income Tax Act, what terms of the plan, partial or full transfer are allowed.
To read his article piece on RESPs and its limits – Click Here