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Why it’s best to Take Maximum Advantage of an RESP for Your Children

Matt Thompson Oct 5, 2019
With the rising education costs such as tuition fees, most students rely on parents to pay for their post-secondary education. For that reason, Canadian parents need to start saving for their children's post-secondary education as early as possible.

While there are many ways to secure funds for your child’s future education, a Registered Education Savings Plan (RESP) would be the best option. With this plan, you will not only save money but also enjoy subsidies from the Canadian government.

What is an RESP?

A Registered Education Savings Plan (RESP) is an investment account in which parents save money for their children's post-secondary education. It allows your investments to grow tax-free since it's a government-sponsored program.
With an RESP account, Canadian parents are also eligible to receive government grants of up to CA$7,200 in a lifetime. That means that your child can a maximum grant of that amount in their entire lifetime. Your income can also influence the awards you'll receive.

How RESPs Work

Once you've opened an RESP account for your child, you will have to make contributions to the account periodically. The government will then award you a grant of 20 percent of your donation up to a maximum of CA$2,500 in a year.

In other words, the maximum amount of money you can get from the government as a grant is CA$500 per year. This subsidy gets offered as the Canada Education Savings Grant (CESG). You may also get another subsidy known as Canada Learning Bond.

However, families with lower incomes can get additional grants from the government. For instance, if a child's parent earns less than CA$45,916 in a year, the government will add a 20 percent grant of their first CA$500 contribution.
When it comes to the contribution, the maximum amount of money you can save for your child in an RESP account is CA$50,000 in a lifetime. However, there is no contribution limit to the amount of money you should save annually.

How to Make the Most Out of Your RESP Account

The most significant advantage of a Registered Education Savings Plan is that your investment will grow tax-free and you'll receive grants from the Canadian government. However, most Canadian parents do not take full advantage of this funding program.
When funding RESP accounts, most parents wait for several years after their children's birth to start saving for their children. If you want to reap a significant amount of money as a grant, you should start contributing to your RESP account as soon as you get a child.
Another way to maximize the benefits from your RESP account is by contributing at least CA$2,500 every year to take full advantage of the CA$500 CESG. However, if you cannot devote the CA$2,500 every year, save what you have.
You can still carry forward your unused grant and claim it in the future years to come. But the maximum amount of money you can claim in one year is CA$1,000.

Opening an RESP Account

If you are searching for a place to open an RESP account, you can visit your local credit union or bank and inquire if they offer such services. But since there are many banks and credit unions providing RESP accounts, you should first compare their quality of service.
One of the best ways to achieve that is by reading the customer's reviews of the company you wish to open an account. For instance, if you plan to create an RESP account at a company like Heritage, you should first read the Heritage RESP Reviews.
As you walk into an RESP company to open an account, remember to carry your original documentation such as the social insurance number. Carry your child’s birth certificate and social insurance number too.

Final Words

Saving for your child's post-secondary education is the best way to invest in the child's future. It will not only relieve you from financial constraints but will also help your child to avoid student debts. If you have more than one child, you can open an RESP account for each of them or a family RESP account.