With back to school just around the corner, it’s a fitting time to discuss saving for college & university. There are a variety of ways to save for your child’s education, but RESPs remain the most common option. Alongside having a personal saving account to save for yourself or your child to go to college, it can help to fund you throughout your/your child’s college education. Understanding Atlantic Union Bank and other banks’ information about a savings account is vital to you making the right decision in how you can save and having good interest rates as well. This article however is about RESPs and to help you understand this popular savings method, I spoke with Kevin Parton, a Certified Financial Planner with Investor’s Group.
WHAT IS AN RESP?
Contributed by Kevin Parton, Investor’s Group
Government of Canada. It allows for you, your family, and your friends to save
for your child’s future education.
programs: the Canada Education Savings Grant and the Canada Learning Bond (if
you qualify). Also, all of your savings grow tax-deferred, so there are no tax
implications while you are taking advantage of the Government incentives.
SOME IMPORTANT FACTS ABOUT RESP’s
option to roll-over your RESP into your RRSPs
qualify) and the Canada Education Savings Grant
– You may also be eligible for the Alberta Centennial Education Savings Grant
(ACES) or the Quebec Education Savings Incentive (QESI), depending on where you
speak with an RESP Specialist to help you to determine which plan is of the
most value for your family
means that you won’t get any grants/government money AND you will pay taxes on
the growth every year. This dramatically limits the long term compounding
any grants/government money. You avoid paying tax in the previous scenario
however you don’t get the free government money or the growth you would get on
those additional funds.
USING RESP FUNDS
contributions. As the subscriber of your student’s plan, you can
elect to withdraw the income, grant, and bonds as EAPs, which will be taxable
in the hands of your student whose low income, and personal credits and deductions
(including the tuition credit, education credit, moving expenses deduction, and
so on) should offset some or all of the income inclusion of the EAP.
of your student’s educational program. Taking a lump sum in the first year may
burden your student with a high taxable income. Spreading out the EAPs over a
number of years takes advantage of your student’s (usually) lower marginal tax
withdrawing EAPs when you can. If there is any CESG or CLB remaining
in your investments held within a RESP after your student completes (or leaves)
their post-secondary program, you may be required to refund this “excess” CESG
you’ll have money when you need it. Before releasing an EAP, your RESP
carrier will require proof of enrollment.
college or university are yours to use as you wish – transfer them to another
child’s plan or withdraw them for personal use.