As post-secondary education costs continue to spiral, an RESP helps families save for their children or grandchildren. It’s a flexible way of investing in a child’s future and a practical way to defer tax to the beneficiary, who will likely be in the lowest possible tax bracket at withdrawal. And contributions can qualify for government grants!
- Funds grow tax-sheltered until the child begins post-secondary education
- Principal amount can be withdrawn anytime, tax-free
- Allowable contribution amount cannot be replenished
- All funds in the plan must be withdrawn before the end of the plan’s 35th year
- Family plans allow the contributor to designate several children as beneficiaries
- Insurable deposits covered by the Deposit Insurance Corporation of Ontario (DICO)
Canada Education Savings Grant
Everyone likes ‘free money.’ When you invest in a RESP, the federal government will contribute a Canada Education Savings Grant (CESG) equal to 20% on up to $2,500 annually for each beneficiary up to 17 years old. This means $500 of free money each year with a lifetime limit of $7,200! Lower income families may qualify for an increased CESG of 30-40%. To receive this grant, the child must have a social insurance number. Applications for this grant are available at Moya Financial.