The Importance of an RESP and 5 Reasons to Start One
Investing in an RESP has many benefits such as decreasing the financial burden that your children will face when attending post secondary education. The earlier that parents start their contributions, the more the plan will grow over time. Listed below are some advantages of opening an RESP for your children.
1) CESG (Canada Education Savings Grant)*
For every dollar you contribute, the Federal Government will provide 20% in CESG, up to $500 per year and to a lifetime maximum of $7,200 per RESP beneficiary!
2) Tax-free compounding*
Income in RESPs is tax-sheltered meaning it grows tax-free during the contribution period. Income is paid as Educational Assistance Payments (EAPs) to RESP beneficiaries and will be taxable in their hands, typically at a much lower rate due to low income and high exemption status of most students.
3) Helps reduce the financial burden for parents.
An RESP will help reduce the financial demand or eliminate it when your child starts their post-secondary education. This will avoid the burden of sudden large payments effecting your household budget when tuition is due.
4) Reduce loans for your child.
Financial debt can be a burden for your child that they carry beyond graduation from post-secondary school. An RESP can help your child graduate with less debt or even debt free.
5) Reduce your child’s need to work through school.
Students go through a lot of stress from studies so they shouldn’t have to work in addition to that. Their extra time should be put towards sports and social activities which are equally important in student life.
*Subject to limitations, speak to your Sales Representative for further information.