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How much will the Government contribute to my child’s future?

by Maxine
Posted August 1 2010 12:41am
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The amount the government will contribute to your RESP depends on several factors. There are two programs available:

  1. The Canada Education Savings Grant
  2. The Canada Education Savings Grant provides a financial incentive for parents to save for their child’s post-secondary education using RESPs.  

This grant equals 20% on the first $2,500 of your annual contributions.

On the first $500 you save in your child’s RESP account, the Canada Education Savings Grant will give you:

  • Up to $200, if your net family income is $38,832 or less
  • Up to $150, if your net family income is between $38,832 and $77,664
  • Up to $100, if your net family income is more than $77,664

These numbers were taken from the 2009 CanLearn brochure on Education Savings for your child (www.canlearn.ca). The net numbers are adjusted yearly, so check with your service provider for the most up-to-date figures. 

If you are able to save more than $500 every year, the Canada Education Savings Grant can add up to $400 on the next $2,000 saved. The maximum lifetime grant the Government of Canada can give your child through the Canada Education Savings Grant is $7,200 per eligible child.

Your family income could qualify you to receive additional funds from the Canada Education Savings Grant. No matter what formula you choose, your lifetime limit remains $7,200 per eligible child. 

* If your net family income is below $39,065†, the grant will be 40% for every dollar on the first $500 you save and 20% of the next $2,000 in your child’s RESP each year. That means you could receive up to $600 in CESG per year.*

* If your net family income is between $39,065† and $78,130†, the grant will be 30% for every dollar on the first $500 you save and 20% of the next $2,000 in your child’s RESP each year. That means you could receive up to $550 in CESG per year.*

* Acknowledgement Heritage Education Funds Inc. 

The Canada Learning Bond

The Canada Learning Bond is a different option that is geared towards families who do not have a high enough income to contribute substantially to an RESP, but who would like to save for post-secondary education.

You are eligible for the bond if:

  • Your child was born after December 31, 2003; and
  • Your monthly Canada Child Tax Benefit payment includes the National Child Benefit Supplement. (www.canlearn.ca)

With this program, qualifying families receive a lump sum payment of $500 into their child’s RESP. Each year, another payment of $100 will be made automatically until the child is 15 or as long as you continue to receive the National Child Benefit Supplement. The total available to you could be up to $2000. You do not need to contribute any of your own money to get this bond. (www.canlearn.ca)

If your family income is less than $39,065 your child could receive additional funds through the Canada Education Savings Grant if you are able to make contributions to their RESP. The grant will provide 40% on every dollar on the first $500 you save and 20% on the next $2000 each year. This could mean up to $600 on Canada Education Savings Grant money every year.

For residents of Alberta and Quebec there are further options available through the Alberta Centennial Education Savings Grant or the Quebec Education Savings Incentive.

Sources:

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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.

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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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