The easiest way to save money and grow your children’s education fund is through a Registered Education Savings Plan (RESP). It is a tax-free savings plan created to help you save for your child’s Post-secondary schooling. Additionally, the government matches 20% of your annual contributions up to $500 annually. When you withdraw the funds, an extra tax benefit comes into the picture where the withdrawal amount will be taxed to your children at a low rate instead of you.
Below-mentioned is a few financial planning tips for your children’s education:
You can ask your family members for RESP donations
Birthdays, graduations, and holidays are the best opportunities to ask your relatives, friends, and grandparents to contribute to your child’s RESP. It is an excellent financial option as it is way better than your child receiving a traditional gift. If you are concerned, your child will hate this idea? Don’t worry; for babies and toddlers, they won’t make a fuss, but for teenagers, you can ask your family members to maintain a portion of their gift budget towards their Registered Education Savings Plan (RESP).
They are tax shelters
RESPs are tax-free investmentaccounts. You are not required to pay tax on capital gains and interest income if you don’t withdraw your investments early. If the RESP is used towards your child’s tuition, post-secondary education, books etc., the investment is subject to taxes, but the tax bracket is lower than the parent’s Tax bracket.
You get free money from the government!
Yes, that’s right! For every dollar that you contribute to your child’s Registered Education Savings Plan (RESP), the government will contribute 20 cents which adds up to a maximum of $500 annually. That is basically a 20% return on your investment. Additionally, if you reside in certain provinces, you may be eligible for additional grants.
Freedom to invest your money
A significant advantage of investing in RESPs is that you have the freedom to invest the money in mutual funds, GICs, stocks, bonds etc.
The funds can be used for retirement as well
If you are unsure that your child will pursue post-secondary education, there is no need to panic. A Registered Education Savings Plan (RESP) can be opened for 36 years. You can always transfer the funds to your other child without paying any additional taxes.
Various investment options
When you choose a Registered Education Savings Plan (RESP), you choose your various investment options until your child is ready to pursue post-secondary education goals.
To find out more details about Registered Education Savings Plan (RESP) or see how we can help plan for a child’s post-secondary education, give the Canadian L.I.C team a call today to schedule an appointment. We are based in Brampton, Ont and offer our services all over the country. Our professional & friendly team will be more than happy to assist you with whatever queries you may have.
Have you started saving for your child’s post-secondary education yet? If not, you should! Education costs in Canada are not cheap, and the best way to save money on a tight budget to ensure they get the best education is through a Registered Education Savings Plan (RESP). With unexpected expenses that may arise in the future, putting aside a small amount of money in an RESP will do a world of good in the future for your children.
Below are some of the best ways to give your children the education they deserve:
Open a Registered Education Savings Plan (RESP)
It is one of the easiest ways to save and grow your child’s education fund. A Registered Education savings plan created to save money for your children’s post-secondary education. Additionally, the government matches 20% of annual contributions, which amounts to around $500 annually, and a maximum lifetime contribution of $7,200 for one child.
Govt Grant $7,200 is free money from the government in addition to your contributions that are growing tax-free in the RESP. Another benefit is when you decide to withdraw the funds, your child will be taxed, and since they earn little to no income, it is practically tax-free. Most parents’ concern is that they fear contributing a sizeable amount each month to the RESP. That is not the case; contributions in the region of $25 – $50 a month are more than enough. The whole concept of an RESP is to encourage parents to save for their children’s education, not make large contributions. Once you sort out your finances, you can increase the contribution. All you need to know is that an RESP can be flexible.
Make the contributions automatic
If you cannot devote yourself to making regular RESP contributions, you can request your bank to transfer the contribution amount automatically from your savings account into your RESP. The companies also set up monthly automatic PAC for scheduled contributions.
Reduce your spending habits
Try to make some lifestyle changes that ensure you make a decent enough contribution for your children’s RESP. Reduce the number of social gatherings and throw less elaborate birthday parties for your children, yes they might not like it, but in the long run, they will be certainly thank you for it. You can even encourage your relatives that instead of purchasing an expensive gift for your child, they can contribute to your child’s RESP money.
Encourage your family to make RESP donations
As mentioned above about your relatives contributing money for your children’s birthday instead of buying an expensive gift, you can even encourage them to make contributions on other special occasions of your child like their graduation or during the holiday period.
If you require more information on RESPs or need expert help in getting started, please do not hesitate to reach out to our advisors at Canadian LIC. They will discuss all the necessary options and help you build a sustainable RESP plan for your children. Contact us today to set up an initial consultation.
Call 1 844-542-4678 to speak to our advisors.
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