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What happens when my child is ready to use their RESP?

by Maxine
Posted August 1 2010 12:43am
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RESPs can be accessed as soon as your child enrolls in a qualified full-time post-secondary education program. These include apprenticeships and programs offered by a trade school, CEGEP, college or University. These usually include a course of study that lasts at least three consecutive weeks, with at least ten hours of instruction or work each week. If the program is at an educational institute outside of Canada it must last at least 13 weeks.

If your child does not choose to continue education after high school you have several options, depending on your RESP plan. You should speak to your plan holder about specifics. You always have the option of waiting to see if your child changes his or her mind and decides to go to school. RESP accounts can remain open for up to 36 years. You can also transfer the money to one of your other child’s RESP accounts, 

With many plans you can choose to transfer the money into a Registered Retirement Savings Plan (RRSP) or withdraw your contribution. When you withdraw the money you will have to pay the taxes on the money that you earned in your plan as interest. It will be taxed at your regular income level, plus an additional 20 per cent. All government contributions are returned, unless you transfer the money to a sibling’s account. The Canada Learning Bond cannot be transferred to another child and must be returned to the Government of Canada. Any additional money that you contributed to the RESP and the interest it earned goes back to you. Be sure to talk to your RESP provider for specific details.

Sources:

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Checklist before opening an RESP

by Maxine
Posted August 1 2010 12:45am
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 Use this checklist before you open and RESP:

  • Make sure that both you and your child have a SIN (read the details here)
  • Choose an RESP provider that meets your needs
  • Set your goals and discuss these with your provider
  • Choose the plan that’s right for you

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Top 10 Reasons to open an RESP

by Maxine
Posted August 1 2010 12:45am
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These are the top ten reasons for you to open an RESP for your child(ren):

  1. You gain access to government grants that provide you with additional money towards your child’s post-secondary education.
  2. Taxes are deferred. Earnings on RESP investments accumulate without tax.
  3. When the accumulated income is paid out from the RESP as Education Assistance Payments, it will be taxed in your child’s hands. Your child will likely pay much less tax than you would on this income. 
  4. Friends and family can contribute to your child’s RESP and help the savings grow.
  5. Canada Learning Bonds allow those who qualify for the National Child Benefit supplement to receive up to $2,000 towards their post-secondary education.
  6. There are flexible options at the time of maturity. 
  7. Post-secondary education is growing increasingly expensive - RESPs help ensure that your child receives the education he or she wants.
  8. RESP accounts can remain open for up to 36 years, so if your child chooses to defer his or her education plans after high school you can still use your RESP money when the time comes.
  9. With a Family Plan you can transfer your contributions between siblings if one chooses not to attend post-secondary education.
  10. Probably the most important reason to open an RESP right now is to assure you are financially ready to support your child’s education. Starting now ensures minimized stress on your finances. The earlier you invest, the greater the dividend for you and your child when the time finally arrives to head off to college or university.

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Q & A on RESPs

by Maxine
Posted July 31 2010 10:49am
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For many parents the last thing they are thinking about when they gaze at their newborn is the cost of raising this baby. Thinking about this baby going off to college or university is far from their minds. Yet, planning while your baby is young can result in significant savings. Registered Education Savings Plans (RESPs) can help. The Government of Canada allows savings in these accounts to accumulate tax free until your child enters post-secondary education. The government also helps with special incentives such as the Canadian Education Savings Grant and the Canada Learning Bond. An RESP is one way that you can save for your baby’s future school costs.

The following is a series of Q & A’s about RESPs.

  1. What is an RESP?
  2. Why do you need an RESP for your child(ren)?
  3. What do I need to open an RESP for my child(ren)?
  4. How do RESPs work?
  5. How to Choose a Broker
  6. Can I open an RESP for a teenager/older child?
  7. How much will the Government contribute to my child’s future?
  8. What happens when my child is ready to use their RESP?
  9. Checklist before opening an RESP
  10. Top 10 Reasons to open an RESP

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