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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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What is an RESP?

by Maxine
Posted August 1 2010 12:17am
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An RESP (Registered Education Saving Plan) is a registered savings account with the Government of Canada that allows parents to save money for their child’s education after high school. The interest on the money is not taxed until it is taken out of the account, (unless you contribute more than $50,000).  When the RESP funds are withdrawn to pay for tuition, the money is taxed to the student and not to the parent. Since most students have little or no income they will likely pay little to no taxes on this money.

If your child decides not to continue his or her education past high school, the money in an RESP can be transferred to another beneficiary (a younger child, for example) or, in some cases, it can be transferred into your Registered Retirement Savings Plan. The funds can also be withdrawn, but taxes will have to be paid on the accumulated interest. Any government grants you have received on the money will be returned to the government.

Sources:

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Why do you need an RESP for your child(ren)?

by Maxine
Posted August 1 2010 12:30am
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As many parents already know, the cost of post-secondary education continues to grow, making it more difficult for you to shoulder the cost of tuition alone and nearly impossible for a student working part-time to pay tuition without additional help.  While you might not be thinking about the costs right now, when your focus is on your new baby or young toddler, the earlier you start saving the more your savings will grow! And with incentives and tax shelters from the government, there are many opportunities to maximize your savings. With estimates putting the cost of post-secondary education well over $100,000 in the not-too-distant future, do you really want to turn down an opportunity to further your child’s education? 

The Government of Canada provides incentive programs, called the Canadian Education Savings Grant and the Canada Learning Bond, through Registered Education Savings Plans (RESPs). These incentives can add a substantial amount of additional funding to your RESP savings. Your child is only eligible for these grants if you open an RESP.

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What do I need to open an RESP for my child(ren)?

by Maxine
Posted August 1 2010 12:33am
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Opening an RESP for your child(ren) is simple. You and your child will need a Social Insurance Number (SIN) and you will need to choose an RESP provider. 

Getting a Social Insurance Number for your baby:

To receive a SIN number for your child you must visit a Service Canada (http://www.servicecanada.gc.ca/eng/sin/apply/proof.shtml) office and provide an official document that proves your child’s identity and status in Canada. For a Canadian citizen, you must provide a Birth Certificate or your Certificate of Canadian citizenship documents. 

If you are a Registered First Nations person and would like to register your status on your SIN record you must also submit a Certificate of Indian Status issued by Indian and Northern Affairs Canada (INAC) with your Birth Certificate.

Please see Service Canada’s detailed website on this topic: http://www.servicecanada.gc.ca/eng/sin/apply/proof.shtml

If you have all the correct documentation you can receive a SIN when you visit the Service Canada office and your card will be mailed to you at a later date.

You can also apply by mail if you do not live near a Service Canada office or cannot schedule a visit. This will mean sending original copies of your supporting documents and an application in the mail. You can find the address and download the application here: http://www.servicecanada.gc.ca/eng/sin/apply/how.shtml 

In Alberta, British Columbia, Ontario and Nova Scotia parents can apply for newborn registration when their child is born. This means that you can register for your child’s SIN at the same time that you apply for their registration of birth. This convenient option will save parents from filling out multiple applications, and avoids additional visits to Service Canada. You can find more details about this program here: http://www.servicecanada.gc.ca/eng/sin/apply/newborn.shtml

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