Education is a basic right of every child and that is why every parent is obliged to ensure that their children receive a proper education. Considering the fact that education can sometimes be expensive, it is important for parents to start planning for their child’s education early enough asking to experts at Heritage Education Funds.
How can this be done? Well, there are various ways through which parents can plan ahead and one of the best ways is through Registered Savings Education Plan.
A registered Savings Education Plan (RESP) is a Canadian government sponsored program. The aim of the program is to encourage parents to save in their children’s post-secondary education.
All contribution earnings from Heritage RESP are exempted from tax. Besides, the government also contributes up to 20% to all persons under the age of 18.
What makes Registered Education Saving Plans more attractive is that the government does not charge parents any tax until the money is withdrawn. During that time, contributions towards the RESP are issued tax-free although the total earnings from the program are taxed.
Subscription into a Registered Education Savings Plan can begin as soon as a child is born. This implies that a parent has up to 18 years to contribute towards his or her child’s post-secondary education. It starts with a parent going to a credit union, bank or any other financial institution and opening a bank account. Any member of a family is legible to contribute towards that account.
The extra amount contributed by the government is referred to as the Canadian Education and Savings Grant. The amount issued by the government is limited to 20% although it can increase for people with special needs or from low-socio-economic backgrounds. The grant is capped at $7,200.
Upon reaching college, the child qualifies for educational assistance payments (EAPS). EAPs will serve as a student’s income for the entire college life. However, if the child does not proceed to college or University, then funds are returned to the contributor tax-free. This can only be done after the maturity of the savings plan.
The other thing to note about Registered Education Savings Plans is that the number of permitted plans per child is unlimited. Nonetheless, there’s a limit to the number of contributions one can make which currently stands at $50,000 per child from all RESPs.
Most people prefer having more than one savings plan so as to reduce the lifespan of the program.
Is it worth to use Registered Education Savings Plans? Yes, this is something that every parent should consider. However, procrastination has often stood in the way of many parents who would want to save for their children’s post-secondary education. It is important to start contributing as early as possible towards RESPs.
In a nutshell, saving is a good culture especially when it comes to the future education of our children. It is impossible to predict how the future will be and that is why beginning to save early can serve as a guarantee for our children’s post-secondary education whether we are around or not.