Choosing the Right Provider for Your Registered Education Savings Plan
The RESP, which stands for Registered Education Savings Plan, will help to secure your kids future especially if you think that they would want to pursue additional education after high school. It is sponsored by the government and the Canada Customs and Revenue Agency allows it to grow free of tax.Money that is paid at the maturity of the plan may be tax deductible from such earnings for the student.
The contributions for the plans are managed and collected by a promoter, which can be a private company/person, who subsequently invests them. The amount contributed could be as high as $4,000 per student beneficiary for every calendar year and can have a lifetime cap of $42,000 free of tax. Every student can have additional plans but the cap is strictly for every student.
Most importantly is that the government is going to add 20 per cent or $400/year to the initial $2,000 up to and to include the year that the students turn 17 on their birthday. Referred to as the Canada Education Savings Grant or CESG, for short, any paid in amounts are not considered in the yearly limit for the purposes of taxation.
The maximum amount granted by CESG is $7,200 throughout the term of the student’s plan.If the CESG is not claimed every year, it can still be paid for up to a total accumulated amount of $800. In case the RESP is not spent for educational purposes in the end, any CESG payments will need to be refunded to the government.
Things to consider when selecting an RESP provider.
A lot of financial organizations are licensed to offer RESPs, although each one may be different from the others. With the various options to select from, see to it that you spend time to carefully select the provider that can best meet your needs. The provider is going to help you select the correct RESP, advise you about making investments, manager your RESP, and give the money when it is time for your child to go to post-secondary school.
Several provides can charge service fees or put a cap on how many times you have to contribute. Request the provider to give you all the details concerning their fees, penalties, limits, payment options, and all others they might require before opening an RESP.
Also, you have to inquire what plans the provider can offer, what are the benefits, and how much it will cost. Investment options will likely vary as well. The providers can choose from mutual funds, guaranteed investment certificates, stocks, savings or time deposits on where to invest the RESP funds. These various options vary in the risks and rates of return that they offer.