If you are concerned about funding your child’s education, then you should take advantage of this great opportunity that a Registered Education Savings Plan has to offer by Heritage Education Funds. A few of the benefits are listed below:
1. An RESP Grows Tax-Free
The money invested in an RESP grows tax-free and will be taxed in the hands of the beneficiary. In other words, your investment in an RESP will grow, and you will only be taxed on the total earnings as soon as you get the money out for your child’s post-secondary education.
2. Government Grants
Another benefit of investing in a Registered Education Savings Plan is that you get free money from the government. The government adds to your RESP savings annually, through the Canada Education Savings Grant (CESG), which adds 20% to the first $500 of annual Registered Education Savings Plan contribution yearly. Also, there are many other grants for which you may qualify depending on your income level or area of residence. Low-income parents are entitled to the Canada Learning Bond, while those living in areas such as Alberta, Saskatchewan or Quebec qualify for a provincial grant.
3. EAPs Are Taxable in the Hands of the Beneficiary
When your child gains admission to university, they will have access to funds, known as Education Assistance Payments (EAPs), from their Registered Education Savings Plan. EAPs are made up of government grant money and the income part of your investments in the RESP. Keep in mind that EAPs are taxable in the hands of the beneficiary – not you. Moreover, students are in a lower tax bracket than parents. That’s understandable since they don’t earn as much income. In this case, the tax paid would be less. Also, you or your child may be able to withdraw the contributions tax-free.
4. Access to a Wide Range of Investment Options
Another reason why you should open an Heritage Education Funds RESP is the variety of investment options available. You can choose one that best suits your needs. Different institutions offer an array of investment options including GICs, mutual funds, stocks or bonds. You can choose one or more tailored to your goals and time horizon.
5. Contributions from Loved Ones
Setting up RESP for your child doesn’t fall on your shoulders alone. Simply put, anyone can contribute to the account on your behalf. Your child’s RESP can grow and compound with contributions from loved ones. One way to do this is to solicit monetary gifts on special occasions such as birthdays or holidays to contribute to your child’s RESP.
6. RESP Accounts Stays Valid for 36 Years
The reality is your child may decide not to pursue post-secondary education after high school. If eventually they have a change of heart and are ready to go back to school, the RESP money can be used to fund their education. However, it is essential to get more detailed information about RESPs from your advisor or your financial institution to make sure there are no harsh penalties or restrictions if your child decides to wait to continue their education.
RESP savings come with many benefits, both for you and your child, so take advantage of it today.