How RESP Helps Children
Saving up for your child’s future education doesn’t have to be stressful or time-consuming. RESPs are easy to set up, easy to use, and easy to invest in. If you are new to this type of investment, there are a few things you should know.
RESPs, What are they?
An RESP, or Registered Education Savings Plan, is an investment plan assisted by the government and is tax-deferring. Anyone can contribute to this flexible plan, from the time it is opened until the child turns 18 years of age. You can open an RESP for your child anywhere from birth to the age of 14. You can contribute up to $50,000, spreading it out of a period of time or depositing a lump sum. Grandparents, godparents, aunts, uncles, and friends can all contribute to the RESP.
How an RESP Works
Once the child or student is ready to begin post-secondary education, they will need to have a Proof of Acceptance from a post-secondary education. He or she can then start accessing funds from the RESP. If any grants were given by the government, those funds will already be deposited in the RESP.
Payments called EAPs, or Educational Assistance Payments will begin when the child enrolls in a post-secondary institution. EAPs are made up of mostly investment earnings and grant money. Either parent or child can withdraw the money, but it is the student’s responsibility to pay the tax on the EAP. Once the child takes out money from the RESP, he or she will also be taxed on any interest that has accumulated on the fund.
There is no need to rush your child to go to post-secondary education. If the child doesn’t go to school, the money will be returned to both the contributors and the financial institution. Grant would be returned to the government and not redeemed. RESPs can be open till the child turns of age 35. Confirm the length of time your RESP is set for.
As you can see, an RESP can only set your child up for future success. Ask us for more information if you are interested in saving up for your child’s future.
Investing in an RESP is a smart and stress-free way to secure your child’s future education. Don’t hesitate to ask for more information and start saving today with Harpreet Puri.