When it comes to a savings plan, aren’t we all very inclined for the same? But especially when it comes to education savings plans, no parent wants to compromise. There are plenty of plans which are offered by the Government to the residents, for their security. One such plan we are going to talk about is – RESP – Registered Education Savings Plan.
RESP, or right registered education savings plan, is ideally a savings plan offered by the Government of Canada that allows you to save for your kid’s education plan. You can use this money to cover the education cost after high school.
The tax-advantaged plan will enable you to save regularly and help your kid achieve their objectives without breaking the bank. Anyone, including parents, grandparents and other friends and family members, can open a RESP for their child. The best part is that the plan can be opened individually or joined jointly by joint partners or spouses. Even the child care agencies can open the plan, and you can be named a beneficiary.
How can you choose the right RESP?
You need to choose the right RESP, and if you don’t know how to select, you can consult a financial institution to help you. Group plans are also offered by some organizations that provide group scholarship plans.
Family plan
The plan is your best bet if you have more than one child in the house. You can easily name one or more children to get the required savings when the deadline nears their high school education. The only condition here is that the kid must be related to you by adoption or blood. They can be anyone from your kids, grandkids, step kids or step grandkids. As per the income tax act, a blood relationship is that parent and kid or that of sister and brother. Nieces, nephews, aunts etc., are not considered as blood relatives.
Additionally, you cannot be considered your blood relationship. The best part about the family plan is that you can share the earnings between the kids, and the RESP is mainly used for beneficiaries named under the program up to $7200. If all the beneficiaries are siblings under the plan, then an additional Canada education savings grant and the Canada learning bond can be paid.
Individual plan
It is also known as the non-family plan, and if you are not related to the child, you plan to save for it. Under this plan, only one beneficiary is named, and they don’t need to be related to you by blood or so. You can open this plan for yourself or any other person. But the Canada education savings grant and Canada learning bond are likely to be paid to the eligible beneficiaries only.
Group plan
This plan is mainly available for one child only, and the best of all is that the child doesn’t have to be related to you. A group plan is your best bet if you can make payments regularly throughout the term. Under this plan, your savings are combined with other people’s savings. The amount each child gets depends on how much money is available in the group account and the number of kids of the same age in school these days.
These plans can be easily availed through group plan dealers who ideally aim to invest their money in low-risk investments. All the group plans are different and have their terms and conditions. Before investing in the program, you need to check the terms and conditions.
Additionally, ensure that you read the plan rules thoroughly. Ideally, it would be best to commit to making regular payments in the plan. Fees tend to be applicable if you stop their stock price. Group plans are your best bet if you choose to have someone else decide how to invest the funds in school for you, and you are sure that the child you are saving money for is likely to continue their education after completing RSEP.
Perks of RESP
You can get several tax benefits when you open a RESP account as it is a tax-advantaged account, and your money can quickly grow tax-free. The best of all is that withdrawals are tax-free, so you don’t need to stress. But you need to know that investment gains are taxable, and the responsibility to pay the tax gains fall on your kids.
You can consider that your kid’s income will grow by that time so they can pay the tax on gains without any hassle. Irrespective of your contributions, the government will pay you to get extra money from the state. The best part is that you don’t lose anything here, and the extra money can help you pay your kids’ education fees.
To know more about RESP plan, contact Ez Financial.
