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RESP
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What is Registered Education Saving Plan?
Registered Education Saving Plan (RESP) helps you save in advance specifically for post-secondary education. It helps you save on taxes. You can make small contributions over the years and the accumulated amount can save you from taking an education loan in future.The Canadian government started RESP to save Canadian citizens from a load of heavy interest rates. To push citizens to save Canadian government also contribute some amount to the RESP depending upon the amount you have in your RESP account.
Who Can Invest in RESP
- Any Canadian citizen or permanent resident can open RESP
- You can open it for any child, it is not mandatory that the child has to be related by blood.
- You can save for a child who is less than 18 years of age.
Benefits of Saving in an RESP
There are other registered saving accounts other than RESP that help you save money for your future. But if you want to save specifically for education then RESP is the best option. Other than increasing your savings there are other benefits offered by RESP.
- RESP help you earn better returns as compared to a regular saving account.
- After maturity, the amount you will get will be tax-free.
- The Canadian government can contribute a maximum of up to $7200 to an RESP account.
- No annual contribution limit is there.
- You can contribute up to $50,000 over time.
Thinking About Starting An RESP Account, Things You Should Know
- If the amount in the RESP account is not spent on post-secondary education of the child within 36years of opening an RESP account then the grant given by the Canadian Government will be retrieved.
- If you use a portion of the RESP amount on something other than paying for education then you have to pay a penalty. The penalty will be 20% of the amount remaining in the RESP account.
Different Types Of RESP Account Available
There are different types of RESP accounts available that you can choose from depending upon your needs.
1. Individual RESP: You can save for the education of one child through this account. Only a single person can contribute and the child doesn’t need to have blood relations with the contributor.
2. Family RESP: Savings can be made for the education of one or more children. Single contributor is allowed and beneficiary and contributor must be related by blood.
3. Group RESP: Multiple people can contribute to this account but only for the education of a single child. No compulsion that beneficiary and contributor have blood relations.The grant received from the Canadian government does not depend upon the type of RESP account you open. However, there are different types of grants available depending upon the territory you live in.
Types Of Canadian Government Grants Available
1. Canada Education Saving Grant (CESG):
- CESG is disbursed by the federal government.
- You can get up to grant up to 20% of your contribution amount or $500 annually whichever is less.
- $7200 is the maximum government grant amount deposited throughout the RESP tenure.
2. Quebec Education Savings Incentive (QESI):
- Provincial government is responsible for grant disbursement.
- Only Quebec families are eligible.
- Grant limit is 10% of contribution amount or $3600 throughout the RESP tenure.
3. British Columbia Training and Education Savings Grant (BCTESG):
- Provincial government is responsible for the BCTESG grant.
- Grant amount is disbursed in one go.
- Grant limit is $1200
- Only British Columbian families are eligible for a grant.
4. Canada Learning Bond (CLB)::
- Families coming in lower-income criteria are eligible for this grant.
- Grant is valid till the child reaches the age of 15.
- Annual allowed grant is up to $500 and RESP tenure limit is $2000.
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