Canadian parents looking for ways to save enough for their child’s future education have an outstanding option in this country, and that is an RESP!
In this article we touch on WHAT an RESP is and WHY you should open one.
What is and RESP?
A Registered Education Savings Plan is, like the name suggests, an investment account geared towards saving for a child’s education. An RESP allows investments inside the account to grow tax free. The big benefit with RESPs is that the government pays you to save by kicking in a grant of up to $7,200 over the span of the plan.
Why open an RESP?
Here are 5 reasons to open an RESP for your child.
1.Post-secondary educations continues to get more expensive. The average tuition for a four-year undergrad university program in Canada is over $27,000, and that doesn’t include accommodation and food, let alone other expenses. We estimates the total annual cost of post-secondary education to be close to $20,000—or $80,000 over four years.
2. The money you contribute and invest grows tax-free within an RESP.
3. They are giving away money! If you saved for your child’s education with your own TFSA you’d be missing out on the grants the government adds into your child’s RESP.
4. When your child starts receiving money from the RESP for school, it will be taxed at their income. Since students typically have a low income, their tax bill will be low.
5. RESPs have staying power. If your child doesn’t want to go to school right away, don’t worry. RESP accounts can remain open for 36 years, giving kids plenty of time to see if they want to dive into some form of post secondary education.