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Things You Must Know About Canada’s Registered Education Savings Plans (RESPs)

Registered Education Savings Plan or RESP is a type of savings plan intended for families that hope to save for the education of their children after high school. Although RESPs, generally speaking, are opened to prepare for a child’s educational future, one can open for the benefit of another adult. Now the person who opened the plan will now be called as the “subscriber.”

The moment your child goes up to post-secondary education, he or she can begin getting the benefits of his or her RESP through payments called EAPs or educational assistance payments. EAPs are literally made up of grant money from the government and investment earnings. Once your child begins receiving EAPS, he or she then is called the beneficiary.

So, if you are living in Canada and is interested in RESP, here are the most basic yet important things you need to know about it; remember, the key is picking the right plan for maximum success.
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1 – One of the first things you must know about your savings in RESP is that they’ll grow tax free. In simpler terms, it means that as long as your investment earning stay within the plan, they never will be subjected to tax.
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2 – You likewise should know that if you begin saving up for your child under 17 years old, it means the government will be putting in money into the RESP in the form of a bond or grant.

3 – Moreover, you must become aware that since it is your account or plan, you have the freedom to add money to it whenever you want; but mind you, the usual lifetime warranty amount is $50,000. But in every rule, there always is an exception, and in this case, you might come across plans that require or strictly impose monthly or annual contributions.

4 – It also is interesting to know that contributions aren’t also considered as tax deductible. You however can withdraw them from the plan whenever you want and it will be tax free.

5 – It can’t be denied that you are new to this type of plan intended for your kids, but one thing is for sure: you never will run out of investment options because there are so many of them, including stocks, bonds, mutual funds, and GICs.

Finally, you just have to realize that majority of available plans today have become very flexible and versatile that you can easily choose which ones provide the best guaranties that your investment will turn out to be a success.