Why RESP is important?

Why RESP is important?

Every parent wants to provide their child with the best education possible. They understand that getting a good education is key to better opportunities in the professional sectors. However, over the last decade, education fees for many institutions have spiked and it continues to grow increase. In 2013, for UNI student college fee is around $34,400 from living at home. If they live on campus or in a rental, the cost goes up to $60,000; now, bases on increasing tuition fees, it has been predicted that by 2025, this can rise to $54,000 and $90,500 respectively.

To save that amount of money can be difficult for any family. That is why starting an RESP account is a good idea. RESP or Registered Education Savings Plan has been around since 1988. It acts as a savings vehicle in which you can deposit money and keep it aside for your child’s post-secondary education. When your child is going for higher education, all you have to do is show the necessary proof and the saved amount would be coverage for tuition fee and residence fee as well (if they are living out of home).

How does RESP work?

It’s like any other savings vehicle, the difference is, you can use the money only for your child’s education. You can start the account as early as you can and deposit a small amount throughout its lifetime, but you should know that the upper limit for this is $50,000. Also, in a year, you can contribute a maximum of $2,500. Now, how you deposit that amount is completely up to you. You can deposit small amounts such as $10, $50 or a larger contribution of $100, $500 as well, it depends on you. You also get various investment options of putting your money in, such as bonds, GICs, stocks, mutual funds etc.

The benefits of RESP

This is the best part. You would be glad to know that, while you are depositing cash into the account, the government is investing in your child’s future as well. You read it right, the CESG will contribute 20% of your annual contributions as a grant for your child’s higher education expenses. The maximum limit is $7,200 in a lifetime.

Also, the saved amount in the RESP account is completely tax-free. This means that your savings can grow faster.

Other benefits include:

  • Any friend or family member can contribute to this account, it doesn’t have to be only parents or guardians.
  • This type of account can stay open for up to 36 years, and the beneficiaries are eligible for a disability tax credit

You can find out more about RESP by getting in touch with Harpreet Puri. Remember, University graduates have a higher chance of better income than any high school graduate. Start planning for your child’s future today, open an RESP account and start saving!