Every September I am reminded how important a good education is. I send my daughter off to school for another year and wonder how long she’ll decide to study for. Will she go to College or University after High School? Will she follow her artistic talent and become a self-taught designer like her father?
Regardless of the choices she’ll make, my husband and I decided to start saving for her education.
We opened an RESP for her when she turned two. We’ve been using the RBC RESP-Matic system and it works great for us. We’ve contributing $50 per month since we opened the account. Setting up an RESP was very easy. We visited our financial advisor at RBC and she helped us through it.
There are two main types of RESP plans. You can set up a plan for one individual or you can set up a family plan which lets you name one or multiple family members related by blood or adoption. Both these plans are offered by RBC. We currently have the individual plan but have made an appointment with our banker to add our son to our current plan making it a family plan.
There are many benefits to having an RESP. Tax deferral and direct government assistance are just some of the benefits.
{Did You Know?}
- Interest income and investment growth earned within an RESP are not taxed as long as the funds remain in the plan. Withdrawals from the RESP are taxed to the student which means they will pay little or no tax.
- The Canada Education Savings Grant (CESG) is a program that benefits those under the age of 18. The government matches 20% of the first $2,500 contributed annually to an RESP (up to $7,200 per beneficiary)
- There is no charge to open an RESP with RBC Royal Bank. There are also no annual fees.
- You can make lump-sum contributions or set up automatic contributions.
- Once a student uses his or her RESP they will start receiving Educational Assistance Payments. The beneficiary must claim all EAPs as income on his or her tax return in the year they are received. This usually results in little or no tax since students are in a low tax bracket.
- If your child decides NOT to pursue post-secondary education and is enrolled in a family plan his or her benefits and grants can go to another beneficiary in the plan. If you are in an individual plan, you can name another beneficiary. If the beneficiary is 21 and over he or she can withdraw from their RESP (subject to withholding tax and a 20% penalty tax) or funds can be transferred to an RSP.
- There is a difference between self-directed and pooled RESPs. To learn more about these two types of RESPs click here.
*image taken from the RBC website
You can find out so much more about opening an RESP with RBC on their website. You can also follow RBC on Twitter for lots of great money advise and more.
If you haven’t already started an RESP for your child I highly recommend you plan to start one! It may mean that they graduate from post-secondary education debt free!
Disclosure: I am part of the RBC RESP blogger program with Mom Central Canada and I receive special perks as part of my affiliation with this group. The opinions on this blog are my own.
I wish I was able to do this, but surviving was more important! Education shouldn’t be so expensive, but I am glad there are programs to help.
This is something I wish I could have done for my children. Between bad decisions and living paycheque to paycheque it never got done. But I’m making sure my kids are smarter than I was with their children. Thanks so much for this, I’m going to pass it on to my adult daughters.