Thinking of signing up for an RESP or Registered Education Savings Plan? It is worth considering to be sure, and it could be the most effective way to manage the costs of college education for your children. With the help of such a plan, you will be better prepared for the future when your children are ready for college.
In order to make the most of a Registered Education Savings Plan in Canada, it is necessary to learn as much as you can about the program. You could get more detailed information from a reputable RESP provider in Canada, but here are the basics that everyone should know about such plans.
The primary function of an RESP is to help benefactors or subscribers pay for the cost of post-secondary education for their children or the beneficiaries of the plan. Subscribers or plan holders designate the beneficiaries; those who will eventually be able to use the funds in the plan. Beneficiaries are usually children of plan subscribers, but they may also be child relatives, children of family friends, and even adults and the subscriber himself.
RESPs may be transferable depending on the plan. With family plans, subscribers are usually able to transfer the funds to whomever they wish, if the initial beneficiary decides not to pursue further education. With specified plans, which are intended for children with disabilities, subscribers usually have fewer options with regard to transferring funds.
Payments from an RESP begin when the beneficiary enrolls in a post-secondary education program, such as a college degree program. Payments will come in the form of EAPs or educational assistance payments. Funds for these payments are a combination of investment earnings and grant money provided by the government.
Contributions made to an RESP are tax deferred, as are earnings made from the investment. They will remain tax free for as long as the funds remain in the RESP.
Additional government contributions will be made if the child is younger than 18 at the time of designation as a beneficiary. This will come in the form of a grant or a bond. In some provinces, the local government may make additional contributions as well