RESP DEADLINE: DECEMBER 31st, 2019.
Why should you get an RESP?
1. Government grants
The federal government adds to your RESP savings each year through the Canada Education Savings Grant. Lower-income families may also qualify for the Canada Learning Bond. That’s free money from the government right to your student’s pocket when it comes time to pay tuition!
2. RESP savings grow tax free
You don’t pay tax on any investment earnings as long as they stay in the RESP. Tax sheltered!
3. YOU don’t pay taxes when the funds are withdrawn, the student does:
Once the student is enrolled, they (or you) can start to withdraw educational assistance payments (EAPs) from their RESP. Taxes on EAP’s are payable by the student, not the contributor (you.) Since students tend to have little or no income, they likely won’t have to pay much tax on the payments at all.
4. A variety of investment options
You can choose investments that best suit your investment objectives, risk tolerance, and time horizon. Different providers offer different investment options. Examples: stocks, bonds, mutual funds, GICs.
5. Friends and family can contribute
Anyone can set up an individual RESP for your child – not just you. Your child’s RESP can grow more quickly with contributions from friends and family. Consider encouraging monetary gifts on special occasions to contribute to your child’s RESP. Chat with your financial advisor to set up an RESP that allows additional monetary installments to be added.
6. RESP accounts can stay open for 36 years
If your child chooses to defer their education plans after high school, they can still use the RESP money when they are ready to go back to school. But check the rules of your RESP to make sure there are no restrictions on waiting to continue their education. Under specified plan rules, RESP accounts for beneficiaries eligible for the disability tax credit can stay open for up to 40 years.