We, as parents consider our children as the most valuable treasure and remain concerned about their future. We endeavour to provide them best education so that they may become well-settled in their lives, but as we are well-aware of the higher cost of postsecondary education in Canada, so, it’s important that we start investing for our children’s education when they are young so that we may be free from any financial worries when they are ready for their university.

Initiative of Canadian Government

To ease the financial burden of parents, the government of Canada has designed a unique educational savings program namely Registered Education Savings Plan (RESP) which helps you to accumulate funds for your child’s post-secondary education. The subscriber has to contribute a monthly premium 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).

Who can – open RESP/be the named Beneficiary?

You can enrol in the Diploma RESP if you have a Canadian address with a valid SIN number. 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.

Assistance for low income families

In 2005, the government enhanced the program by providing an additional grant based on the parents’ family income. For low income families, the government offers another grant namely Canada Learning Bond (CLB) with the help of which, 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.

How much money can you save?

The maximum lifetime contribution limit per child is $50,000 while there isn’t any annual contribution limit. This implies that as per your budget, you can invest up to $50,000 in the plan.

To encourage parents to invest funds in post-secondary education of their children as early as possible, the government of Canada has devised CESG plan.

CESG in a Glimpse:

Annual Grant: 20% of your annual contribution Contribution Limit of Annual Grant: $500 Total Lifetime Limit per Saving (per Beneficiary): $7,200

Some provinces offer their own Grant programs in addition to CESG. The federal and provincial governments contribute the grants directly into the RESP, and these additions within your contribution can significantly increase your savings.

Tax Implications

RESP – A UNIQUE WAY TO INVEST FOR YOUR CHILD’S FUTURE 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 interest paid on a loan taken out to make RESP contributions.

How can you utilize the funds if your child doesn’t want to study further?

If your child doesn’t wish to continue his post-secondary education, then you can: 1. Nominate a new beneficiary 2. Take back/withdraw the money 3. Transfer the funds into your RRSP account 4. Donate the funds to an educational institution

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.

This article is © Copyrighted 2019-09- 25 and can be reproduced only with prior permission.

Sandeep Ahuja


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