Benefits of Getting RESP for Your Children
Not every parent in North American can make their children take post secondary education because it is very expensive. If you want to let your children go to college someday, you should make plans for it because you might find yourself with a large financial burden if you don’t. If families are looking at having some financial security, then sending their kids to college is a big possibility.
Parents with children who want to enter college can benefit from the Registered Education Savings Plan or RESP. This is a government sponsored savings plan which is allowed to grow tax-free. Money paid from the plan at maturity may be taxed as income for the student.
Private companies or individuals are the plan administrators and they can invest the money that they collect from the plan. The yearly contributions per student can reach up to $4,000 per student and the lifetime limit is $42,000 without any tax implications. The lifetime limit is per student even if he has more than one plan.
One benefit of RESP is that the government will add 20% to the first $2,000 per calendar year or $400 up until and including when the student reaches his 17th birthday. This is called the CESG or the Canada Education Savings Grant and any amounts paid in are not included in the annual limit for tax purposes.
A student can receive from CESG a maximum of over $7,200 over the lifetime of the plan. You can claim $800 of amounts not previously claimed from the CESG. All money added by the CESG to the RESP should be returned to the government in the event that the money is not used for educational purposes.
The RESP is for Canada residents who have a Social Insurance Number (SIN). The SIN of both the student and the one providing the contributions must be provided to the promoter at the inception of the plan.
There are three main types of RESP plans.
The non-family plan can only have one beneficiary but anyone can make contributions whenever they want for whatever much they want to pay.
In the family plan, the beneficiaries, which can be more than one should be a blood relative of the contributors. When to pay or how much to pay are not restricted.
The group plan are offered by foundations that set how much is paid in and when. The students are divided into age groups and they are equally given a share of the contributions. The rules attached to the group plan is quite complicated and should be researched thoroughly with the plan providers before committing.
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