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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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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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