Registered Education Savings Plan (RESP)
The cost of post-secondary education can be prohibitive to those who don’t plan. At Comtech Fire, we offer our members the opportunity to take advantage of the grants offered by the government to top up your child’s education savings. Your Credit Union will provide you with the information you need, along with sound financial advice, to help you choose your best savings options.
"One of the smartest things I have ever done in my life was to open a RESP account for my daughter. When I first opened it, she was a baby and university seemed a lifetime away but how quickly time flies. Having just completed her first year of university at a cost of $12,000 (while living at home), I have to wonder how families are coping with the cost of education today, especially if they have more than one child. Even with my daughter's part-time job, had it not been for the RESP, she would now be carrying an enormous amount of student debt. I feel really good knowing that years ago I made a wise financial decision and today my daughter has the financial resources to help make her dreams come true. I am not one to give financial advice but I can honestly say "it's a lot easier to set aside a little bit each pay period than having to come up with a lump sum, plus the $7,200 in grant money is an added bonus"."
- Sheila
A Registered Education Savings Plan is a tax-deferred investment that allows you to save for your child's post-secondary education. For each $2,500 contributed annually (either by lump sum or regular monthly investments), a grant of 20% is paid to a maximum of $500 per year. That could work out to $42,000 in RESP contributions over the years, plus the maximum lifetime grant of $7,200 for each student.
If you are unable to contribute or make the maximum contribution in a-given-year, you can carry forward unused contribution room. The rule is, you can only contribute up to $2,500 of the previously carried over contribution room each year in addition to the current contribution room ($2,500). This would give you a maximum grant of 20% or $1,000 in a-given-calendar year while you catch up on missed government grants. You are allowed to contribute more than $5,000 in a calendar year however; a grant will not be paid on amounts above $5,000. When calculating unused contribution room, please remember that the contribution limit prior to 2007 was only $2,000.
Example:
In 2011, Johnnie was born and his parents contributed $2,500 and received a grant of $500 for a total of $3000 in his RESP.
In 2012, Johnnie's parents were unable to contribute to his RESP.
In 2013, Johnnie's parents deposited $3,500 into his RESP. $1,000 was carried forward from the previous year, and $2,500 was deposited for the current year. In total, Johnnie received $700 in grant money ($200 grant on the $1,000 from the previous year and a $500 grant on the 2,500 from the current year).
In 2014, If Johnnie's parents can afford it, they have the option of depositing up to $4,000 into the RESP. They still have $1,500 in unused contribution room from 2012 and they can contribute up to $2,500 for the current year.
Features
- Transferrable between beneficiaries
- Taxes on growth in the plan are deferred until the child takes money for post-secondary education, meaning little or no tax would be payable
- Potential to transfer into your RRSP if child doesn't use the funds (some conditions apply)
Benefits
- Earn government grant of 20% up to $500 a year
