Being parents, we are concerned about the future of our children. We want them to receive the best education and become well-settled in their lives. As the cost of higher education is one of the main expenses, it’s important that you start investing for your child’s education when they are young. This will save you from any unwanted financial worries when they are ready for their education.

The government of Canada has designed Registered Education Savings Plan (RESP) which helps you to accumulate funds for your child’s post-secondary education. The subscriber has to contribute monthly through pre-authorized payments until December 31 of the year in which the designated beneficiary at issue reaches age 17. At the end of the commitment period, your total payout is paid as Educational Assistance Payments (EAP).

If you have a Canadian address with a valid SIN number, you can enrol in the Diploma RESP. When you enrol, you need to designate a beneficiary who should be a child of age 14, or under, who will receive the educational assistance payments when pursuing post-secondary studies. He/she needs to be a Canadian resident with a SIN number. Your child can be made beneficiary of more than one RESP. It is important to note that after December 31 of the 31st calendar year following the plan’s creation, no contributions can be made. Also, the plan must cease to exist no later than December 31 of the 35th year following the plan’s creation. The federal government allows you to contribute up to a maximum limit of $50,000 per beneficiary for life while there is no annual limit on contribution towards the plan. You can contribute by monthly deposits, additional deposits and RESP transfers from another institution in the contribution period from January 1 to December 31.

The great feature of the plan is that since it has been specially created by the government for postsecondary educational support of students, the government contributes grant to the investment which is called the Canada Education Saving Grant (CESG). It was implemented by the federal government in January 1998. The basic CESG is equal to 20% of the first $2,500 ($2,000 before 2007) of annual contributions made to a beneficiary’s RESP.

In 2005, the government enhanced the program by providing an additional grant based on the parents’ family income. To further help low income families to save for their children’s post-secondary study, the government offers another grant namely Canada Learning Bond (CLB). Eligible parents get $500 in the first year and, $100 in each subsequent year of eligibility until the child reaches 15 years of age. The cumulative limit of CLB offered to a child can therefore reach $2,000.

To be eligible, the beneficiary must be a resident of Canada born after December 31, 2003 with a valid social insurance number(SIN). Besides, provincial governments also pay grants to eligible families under the RESP program.

Tax Implications

The contributions made to subscriber’s RESP are not tax deductible from his income. However, the investment income is tax-free as long as it remains in the plan. Also, the subscriber may not deduct from his/her income Sandeep Ahuja interest paid on a loan taken out to make RESP contributions.

RESP is a wonderful plan which enables you to save for the educational future of your child in a planned manner. As an independent insurance advisor working through Punjab Insurance Agency, I deal with different insurance companies offering plans for different types of insurance. I can explain to you in detail, the insurance plan options and coverage that are suitable as per your needs. Besides, I can also help you to purchase mortgage insurance, super visa insurance, disability insurance, critical illness insurance, extended medical plans, group medical plans, RESP, RRSP, travel insurance, TFSA accounts, health and dental plans along with estate planning.

For a no obligation appointment, please call me at 604-996-6862 or email me at sandeepahuja@

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Sandeep Ahuja